Incident: On August 30, the company released its 2024 semi-annual report. According to the announcement, 24H1 achieved revenue of 9.352 billion yuan, -56.04% year on year, net profit to mother -1.48 billion yuan, -126.81% year on year, and net profit without return to mother of -1.451 billion yuan, -127.90% year on year. We believe that the change in the company's performance from profit to loss is mainly due to phased excess polysilicon production capacity, and prices fell below cash costs due to increased competition.

Silicon material production and sales have increased steadily, and cost control capabilities are strong. The company's 24H1 achieved 0.1364 million tons of polysilicon production, +22.80% year over year, sales volume 0.1264 million tons (including internal sales of 5722 tons), or +24.99%. Among them, the top three customers shipped 0.0498/0.0168/0.012 million tons respectively, and customer CR3 accounted for 62.2%.

Overall, sales of granular silicon have increased steadily, reflecting the increase in downstream customers' acceptance of granular silicon. In addition, the company continues to optimize costs. Silicon consumption, energy consumption and production efficiency have improved significantly, and the cost of granular silicon continues to decline. According to the company's forecast, the cash cost of granular silicon is expected to drop below 30 yuan/kg.

The metal impurities and turbidity content are reduced every season, and product quality continues to improve. Since 2024, the quality of the company's granular silicon has continued to improve, and currently maintains an industry-leading level in controlling metal impurity levels. The company's granular silicon has basically fully achieved a 5-element total metal impurity content of less than 1 ppbw; at the same time, the overall proportion of 5-element total metal impurity content of ≤0.5 ppbw products has increased to about 95%, which is superior to the quality standard of N-type dense compound feed in the market; in addition, the proportion of granular silicon 18 element total metal impurities increased from 43.0% in Q4 in 2023 to 69.5% in June 2024, an increase of nearly 62%. Turbidity is still being continuously optimized. All granular silicon has achieved turbidity of ≤ 120 NTU. In particular, the proportion of granular silicon products with turbidity below 100 NTU has increased to 90%. As turbidity improves, the breakage rate of granular silicon has dropped to a level comparable to rod-shaped silicon, which is expected to bring higher value to downstream customers.

The perovskite and silane gas business is expected to bring in additional volume. The company has been deeply involved in perovskite for more than ten years and has achieved breakthroughs in the three major problems of high efficiency, large area and long life. By the end of this year, GCL's GW grade mass production line will be fully operational, anchoring the long-term efficiency target of 35% to 40%. According to GCL Optoelectronics's official account, the company has broken the world record for perovskite conversion efficiency several times. Currently, the maximum efficiency of laminated components can reach 27.34% (2050cm?) After the company's perovskite production line achieves mass production, it may further promote the commercialization of perovskite components. In terms of silane gas, the company has maintained leading R&D and production of high-purity silane gas under the UCC method for many years, ranking first in the world in production capacity, and is expected to become a new profit growth point for the company in the future.

Investment advice: We expect the company to achieve revenue of 18.1/33.7/40.4 billion yuan in 24-26, net profit of -2.375/1.237/2.341 billion yuan, corresponding to 25-26 PE of 23x/12x. As production capacity in the photovoltaic industry is cleared, the cost of granular silicon for superposition companies continues to decline. While profits are expected to recover, market share may increase. Perovskite and silane gas are expected to provide additional volume and maintain the “recommended” rating.

Risk warning: Prices of upstream raw materials fluctuate, terminal demand falls short of expectations, industry competition intensifies, technology development falls short of expectations, etc.