24Q2 revenue/net profit to mother ratio +14.0%/-0.16 billion yuan, lowered to “increase holdings”

24H1 achieved revenue/net profit of 2.98/-0.05 billion yuan, of which 24Q2 revenue/-0.05 billion yuan, of which 24Q2 revenue/net profit to mother was 1.54/-0.05 billion yuan, +14.0%/-0.16 billion yuan. PV glass sales and revenue continued to grow, but the price decline put pressure on profitability. We expect the company's EPS to be -0.32/0.12/0.52 yuan, and BPS 6.85 for 24-26 /$6.97/7.49. Comparable to the company's A/H shares, the average PB for 24 years is 1.2/0.8x. We are optimistic about the company's potential to reduce costs after capacity expansion and cold repair, giving A shares 1.4xPb in 24 years, with a target price of $9.59; considering the discounted liquidity of the Hong Kong stock market and paying more attention to short-term performance, H shares were given 0.6xPb in 24 years, with a target price of HK$4.49, all lowered to “increase holdings”.

Sales of photovoltaic glass continued to grow, and the decline in prices caused the Q2 gross margin to be pressured month-on-month. 24H1 sold 0.19 billion square meters of photovoltaic glass, +31% year-on-year, and the overall yield of the original photovoltaic glass sheet increased by about 2 pcts. 24H1 photovoltaic glass achieved revenue of 2.95 billion yuan, +11.8% year over year, gross margin of 6.9%, -4.3 pct year on year, mainly due to the year-on-year decline in PV glass sales prices. 24H1's overall gross profit margin was 7.0%, -3.7 pct year over year, 5.9% in Q2, and -5.7/-2.3 pct. According to Zhuochuang Information, as of August 22, the average price of 3.2/2.0mm coated photovoltaic glass nationwide was 22/13 yuan/square meter, -20.1%/-32.6% year-on-year. Prices have continued to decline since Q2, and short-term company profit pressure may continue to expand.

The expense ratio remained relatively stable during the period, and the operating net cash flow improved the 24H1 company's period expense ratio by 8.4%, +0.2pct year on year. Among them, the sales/management/R&D/finance expense ratios were 0.4%/2.4%/3.9%/1.7%, respectively, -0.05/-0.1/+0.02/+0.3 pct. The increase in the financial expense ratio was mainly due to the increase in the size of the company's interest-bearing debt. 24H1 company balance ratio/interest-bearing debt ratio is 60.8%/37.8%, +2.8/+3.9pct year-on-year. 24H1 lost 0.03 billion yuan in asset impairment, an increase of 0.03 billion yuan over the previous year, mainly due to the reduction in inventory prices. 24H1's net operating cash flow was 0.02 billion yuan, +0.37 billion yuan year on year, mainly due to the company's continuous optimization of the operating capital income and expenditure structure.

Cold repair of production lines is expected to improve supply and demand. It is expected that cold repairs and boosting efficiency after new production lines are put into operation. According to the National Energy Administration, the country added 123.5 GW of PV installed capacity from January to July '24, +27.1% over the same period last year, and demand will continue to grow rapidly over the same period last year. Since July, many photovoltaic glass production lines have been cold repaired. According to Zhuochuang information, as of August 22, the country's photovoltaic glass production volume was 0.107 million tons per day, +18.9% over the same period, but it decreased by 6.8% compared to the end of June. Since this year, the company has successively cold repaired many old production lines in Hefei and Tongcheng. At the same time, the new production lines of the company's subsidiaries Luoyang New Energy and North Glass are progressing according to plan. It is expected that the company's medium- to long-term production efficiency and profitability will further improve after the cold repair and new production lines are put into operation.

Risk warning: PV installed demand is lower than expected, capacity investment integration is slow, and profit growth falls short of expectations.