Incident: In 2024H1, the company achieved operating income of 37.357 billion yuan, a year-on-year decrease of 8.54%; realized net profit to mother of 0.874 billion yuan, a year-on-year decrease of 118.16%. 2024Q2 achieved operating income of 21.385 billion yuan, a year-on-year increase of 5.02%; net profit to mother of -0.391 billion yuan, a year-on-year decrease of 117.54%.

2024Q2 gross margin continued to be under pressure, and losses narrowed due to month-on-month growth in shipments. 2024H1's battery module shipments exceed 38 GW (including 1 GW for personal use), of which overseas module shipments account for about 54%.

The PV module business achieved revenue of 35.321 billion yuan, a year-on-year decrease of 9.99%; gross profit margin was 4.53%, a year-on-year decrease of 14.13pp. The average sales price of components in the first half of the year was 0.95 yuan/W, and the unit gross profit was 0.04 yuan/W.

2024Q2 shipped 21.94 GW of battery modules, of which 472 MW for personal use, and 2024Q2 shipments increased 36.63% month-on-month. 2024Q2's comprehensive gross profit margin was 3.05%, down 2.01 pp from the previous month, and gross margin continued to be under pressure. However, thanks to the month-on-month increase in the company's shipments and a better level of cost control, the company's 2024Q2 losses have narrowed. As of June 30, 2024, the scale of photovoltaic power plants held by the company was about 3 GW. The 2024H1 photovoltaic power plant operating business achieved revenue of 0.607 billion yuan, an increase of 67.12% over the previous year; gross profit margin of 53.53%. Looking at the net profit composition, the PV manufacturing business segment contributed 1.3 billion yuan in net profit, and the PV power plant business division contributed 0.069 billion yuan in profit.

Production costs for new battery projects have declined markedly, and 2024Q2 cash flow has improved dramatically. The production capacity of 2024Q1's newly put into production of N-type batteries is still climbing, which will have a great impact on the 2024Q1 profit level. With the smooth commissioning and production of the company's new battery project, battery conversion efficiency has been greatly improved, production costs have dropped markedly, and large-size batteries have reached the leading level in the industry in terms of conversion efficiency and production costs. At present, the mass production conversion efficiency of the company's latest n-type Bycium+ (Bycium+) battery has reached 26.5%. The process will continue to be improved to further reduce battery production costs and improve battery cost performance. The net cash flow from 2024H1's operating activities was -1.859 billion yuan, of which 2024Q2 was 1.684 billion yuan, which was positive from month to month. The financial expenses of 2024H1 were 0.2 billion yuan, an increase of 137.17% year over year, mainly due to increased interest expenses on new prices and a sharp decrease in exchange earnings. In addition, the company accrued bad debt losses of 0.089 billion yuan in accounts receivable and 0.434 billion yuan in inventory depreciation.

New loans have increased cash reserves, and integrated production capacity has progressed steadily. By the end of 2023, the company's module production capacity exceeded 95 GW, and the production capacity of silicon wafers and batteries was about 90% of the module production capacity, including more than 57 GW of N-type batteries. According to the company's production capacity plan, the company's module production capacity will exceed 100 GW by the end of 2024, and the production capacity of silicon wafers and batteries will reach 80% of the module production capacity, including about 60 GW of n-type batteries. In order to meet production and operation needs, the company added a total of 24.494 billion yuan in loans in the first half of the year, of which more than 60% were long-term loans for a period of 3 to 5 years, and cash reserves increased dramatically to cope with the uncertainty of the future of the industry.

Profit forecast: The company's TopCon production capacity came to an end in mid-May. Cost efficiency has reached the first level in the industry, and 2024Q2 operating cash flow has also improved dramatically. The company's net profit from 2024 to 2026 is estimated to be -0.819, 2.754, and 3.864 billion yuan, respectively, and the corresponding PE is -42, 12, and 9 times, respectively.

Risk warning: Global PV installation fluctuation risk; overseas trade policy risk; exchange rate fluctuation risk.