Description of the event

In the first half of 2024, the company achieved revenue of 2.979 billion yuan, an increase of 7.2% year on year; attributable net profit - 0.055 billion, a year-on-year decrease of 142.6%; after deducting non-performance - 0.066 billion, a year-on-year decrease of 341.9%.

In Q2, revenue of 1.54 billion yuan was achieved in a single quarter, up 13.9% year on year; attributable net profit - 0.048 billion, down 141.6% year on year; after deducting non-performance - 0.056 billion, down 332.6% year on year.

Incident comments

Sales continued to grow in the first half of the year, and profitability declined. Continued commissioning of the company's photovoltaic glass production line led to a high increase in production and sales. In the first half of 2024, the company produced 0.196 billion square meters of photovoltaic glass products and sold 0.194 billion square meters, up 27% and 31% year-on-year respectively; in addition, the overall yield of photovoltaic glass sheets increased by about 2 percentage points. Corresponding to the same increase in revenue of 7.2% in the first half of the year; profitability showed a gross profit margin of 7.0% in the first half of the year, down 3.7 pcts year on year. Its photovoltaic glass was 6.88%, down 4.31 pcts year on year. The gross profit margin of other functional glass was 5%, up 11.90 pcts year on year, mainly due to the improvement in the float boom year over year. The cost rate for the first half of the year was 8.4%, an increase of 0.2 pcts over the previous year, of which the financial rate increased 0.3 pcts. The year-on-year increase in inventory price reduction preparations for the current period led to an increase of 29.92 million in asset impairment losses; the reduction in subsidies led to a decrease of 84.24 million yuan in other income. In the end, net profit attributable was 0.055 billion, a decrease of 142.6%; after deducting non-performance of 0.066 billion, a year-on-year decrease of 341.9%.

Looking at the full-caliber single square index: the average price in the first half of the year was 15.35 yuan/square meter, down 3.42 yuan year on year, mainly due to the year-on-year decline in the price of photovoltaic glass; the cost of a single flat was 14.28 yuan, down 2.49 yuan year on year, mainly due to falling prices of soda ash, natural gas, etc. This corresponds to a single flat gross profit of 1.07 yuan, a year-on-year decrease of 0.93 yuan. In the first half of the year, the cost of a single flat period was 1.28 yuan, a year-on-year decrease of 0.25 yuan; other income from a single flat rate decreased by 0.61 yuan. In the end, a single flat deduction of non-performance of 0.34 yuan was achieved, a year-on-year decrease of 0.52 yuan.

Prices have declined, and Q2 earnings declined significantly. The company's revenue increased by 13.9% in the second quarter, continuing to benefit from the increase in new photovoltaic glass lines; achieved a gross profit margin of 5.9%, down 5.7 pcts from the previous year, mainly due to the fall in PV glass prices; the rate for the period was 8.5%, an increase of 0.5 pct over the previous year, of which financial and R&D rates increased by 0.5 and 0.3 pcts, and the management rate decreased by 0.4 pcts. In Q2, government subsidies were reduced, and other income decreased by 86.08 million year over year; asset impairment losses also increased by 26.49 million. Ultimately, net profit attributable was 0.048 billion, a year-on-year decrease of 141.6%; after deducting non-performance of 0.056 billion, a year-on-year decrease of 332.6%.

The integration of photovoltaic glass and the acceleration of new construction. As of 2023, the company's production capacity of photovoltaic glass raw sheets was 5270 tons/day, an increase of about 13% over the previous year. Among the projects currently under construction, the main project of the Yixing New Energy Project has been completed and put into operation in 2023, and new construction projects such as Luoyang New Energy and Northern Glass are continuing to advance according to the planned schedule. The company's photovoltaic rolled glass production is expected to continue to grow at a high rate in the next few years, and as the scale expands, the unit cost is expected to drop rapidly.

Investment advice: The Group's “3+1” strategy continues to advance, and the company will focus on developing related businesses in the future as a new energy materials platform.

The estimated net profit for 2024 is about 0.05 billion, 44 times PE for Hong Kong stocks and 103 times PE for A-shares.

Risk warning

1. The progress of PV asset integration is low, as expected;

2. The production capacity investment of photovoltaic glass exceeded expectations.