Key points of investment

The decline in product prices accrued losses, and profits in the first half of the year were under phased pressure. The company released its 2024 semi-annual report. During the reporting period, it achieved revenue of 16.21 billion yuan, a year-on-year decrease of 53.5%, net profit to mother of 3.06 billion yuan, a year-on-year decrease of 167.5%, net profit not attributable to mother of 3.49 billion yuan, a year-on-year decrease of 191.6%; 2024Q2 achieved revenue of 6.28 billion yuan, a decrease of 63.7% year-on-year and net profit to mother of 2.18 billion yuan, a year-on-year decrease of 196%, net profit not attributable to mother billion yuan, a year-on-year decrease of -254%. Considering the continuous decline in product prices in the first half of the year, the company calculated asset impairment losses of 0.5/0.61 billion in Q1/Q2 and 0.11 billion in fair value changes in Q2, putting pressure on short-term profits.

The technical strength is industry-leading, and the non-silicon cost has an advantage. The company promoted the N-type and large-size transformation of the industry. In the first half of 2024, the company's large-size (210 series) export market accounted for 61%, up from 2023; the N-type export market share was 42%, up 6 pcts from 2023. By the end of the first half of 2024, the company's N-type silicon wafer products achieved a single monthly production of about 12.3% of the industry's second-best products and 1.15 sheets leading the industry in kilogram output. Affected by different investment methods, in the context of high unit depreciation, the company's total cost is leading the industry's secondary advantage by about 0.033 yuan/W.

Promote the global layout of production capacity and enhance global competitiveness. Currently, supply-side competition in the photovoltaic industry is fierce, and profit pressure is relatively high. The company is prudently but firmly promoting a global strategy. Currently, it has reached cooperation with RELC and Vision Industries, wholly-owned subsidiaries of the Saudi Public Investment Fund (PIF). The three parties have agreed to set up a joint venture in Saudi Arabia to build a photovoltaic crystal chip factory with an annual output of 20 GW to provide strong support for the company to enhance its global competitiveness.

Investment advice: Maintain an “Overweight” rating. Considering changes in the current market environment and the sharp decline in product prices, we lowered the company's 2024/2025 forecast operating income of 95.2/111.9 billion yuan to 30.9/42.4 billion yuan, and expected to achieve operating income of 54 billion yuan in 2026; lowered the company's 2024/2025 net profit of 12/13.5 billion yuan to -5.14/1.43 billion yuan, and is expected to achieve net profit to mother in 2026 2.49 billion yuan, the diluted EPS for 2024/2025/2026 based on current total share capital is -1.27/0.35/0.62, respectively, and the current stock price corresponds to 2025/2026 PE 23/13 times. We believe that the company is a leader in the photovoltaic silicon wafer industry. It has significant technical strength and non-silicon cost advantages, and is expected to lead the industry through the cycle. In the future, as the industry clears and deepens, the company's competitiveness is expected to become prominent and maintain an “gain” rating.

Risk warning: risks such as capacity expansion falling short of expectations; increased industry competition; new orders falling short of expectations.