Event: On August 30, 2024, the company released its 2024 semi-annual report. 2024H1 achieved revenue of 38.529 billion yuan, or -40.41% YoY; realized net profit attributable to mother of 5.243 billion yuan, -157.13% YoY; realized deducted non-net profit of 5.277 billion yuan, or -158.24% YoY.

24Q2 achieved revenue of 20.855 billion yuan, -42.60% YoY, +18.00%; realized net profit to mother of 2.893 billion yuan, -152.21% YoY, -23.10% month-on-month; realized deducted non-net profit of 2.857 billion yuan, -152.25% YoY and -18.09% YoY.

Drastic price cuts in the industrial chain are compounded by inventory impairment charges, and profits are being pressured in stages. 2024H1, in the face of sharp fluctuations in the industrial adjustment period, the company actively adjusted the pace of production and sales to achieve 44.44 GW of silicon wafers (21.96 GW of external sales); 2.66 GW of external battery sales; and 31.34 GW of modules. Among them, sales in the Asia-Pacific region increased sharply by more than 140% year on year. Currently, the company's profit is under phased pressure. 24H1's gross margin was 7.66%, down 11.42pct from the previous year. In addition, due to the sharp drop in product prices and technological iteration, 2024H1, the company calculated asset impairment losses of 5.784 billion yuan, mainly including 4.87 billion yuan of depreciation of inventory, 0.859 billion yuan of impairment reserves for long-term assets such as fixed assets, and 0.055 billion yuan of depreciation reserves for contract assets.

Adhering to differentiated competition, the advantages of HPBC 2.0 products are highlighted. 2024H1, the company's BC module shipment volume is about 10GW; achieved a landmark breakthrough in HPBC 2.0 mass production technology, the entire battery mass production line was completed, and the technical cost was fully met, forming a leading product layout covering all centralized and distributed scenarios. Based on high-efficiency HPBC 2.0 battery technology, the company launched Hi-Mo 9, a double-sided component product for the centralized market, superimposed with high-quality Terry silicon wafers. The mass production power of the module was as high as 660W, which was more than 30W higher than TopCon components of the same specification. In terms of distributed product upgrades, the Hi-MO X6 Max series products introduced 2382×1134mm optimal component size design, advanced Terry core technology, and increased component mass production conversion efficiency to 23.3%, the reliability was greatly improved.

The construction of BC production capacity has been steadily promoted, and the US component plant has been put into operation. By the end of '23, the company's own silicon wafer production capacity had reached 170 GW, battery production capacity had reached 80 GW, and module production capacity had reached 120 GW. As BC second-generation projects such as Xixian Phase I 12.5GW batteries and Tongchuan 12GW batteries advance, HPBC 2.0 products will be launched on a large scale by the end of 2024. It is expected that the company's BC production capacity will reach 70 GW by the end of 2025 (of which HPBC 2.0 production capacity is about 50 GW), and all domestic battery bases plan to migrate to BC products by the end of 2026. 2024H1, the company has achieved smooth customs clearance of shipments in North America, and the US 5GW component factory has officially been put into operation, forming strong support for business development in North America.

Investment advice: We expect the company's 24-26 revenue to be 90.663/115.715/142.584 billion yuan, net profit to mother of -4.152/4.478/7.079 billion yuan, based on the closing price of August 30, corresponding PE is 23X/15X in 25-26. The company will insist on differentiated competition, continue to upgrade and iterate products, deepen the global production capacity layout, and maintain the “recommended” rating.

Risk warning: Downstream demand falls short of expectations, market competition intensifies, industrial chain price reduction causes impairment losses, etc.