Key points of investment

There is an imbalance between supply and demand in the photovoltaic industry, and the company's performance declined

With 2024H1, the company achieved operating income of 43.797 billion yuan, a year-on-year decrease of 40.87%; net profit to mother was 3.129 billion yuan, which changed from profit to loss year-on-year. Achieved a gross sales margin of 7.12%, a year-on-year decrease of 27.02pct; the net sales margin was -8.31%, a year-on-year decrease of 31.37pct. With 2024Q2, the company achieved operating income of 24.227 billion yuan, a year-on-year decrease of 40.66%, and a month-on-month increase of 23.79%; net profit to mother was 2.343 billion yuan, which changed from profit to loss year-on-year, and profit to loss. The gross sales margin was 5.43%, down 3.77pct from the previous month; the net sales margin was -12.36%, down 9.05pct from the previous month. The decline in performance is mainly due to oversupply in the photovoltaic industry chain. Prices of major products have dropped sharply year-on-year since the second half of 2023, and corporate profits are under phased pressure.

The scale of shipments continues to grow, and the scale advantage remains leading

2024H1, high-purity crystalline silicon: sales volume was 0.2289 million tons, up 28.82% year on year; unit comprehensive electricity consumption fell below 50 degrees, and silicon consumption was as low as 1.04 kg/Kg-Si. The 0.2 million-ton polysilicon project in Yunnan was successfully put into operation in May and has now fully met production standards; the Baotou 0.2 million-ton high-purity silicon project is progressing steadily and is expected to be completed and put into operation by the end of 2024. At that time, the polysilicon production capacity will exceed 0.85 million tons; the Maoqi Phase I and Cangxi Phase I industrial silicon projects will be completed and put into operation by the end of 2024. Solar cells: completed more than 35 GW of battery sales. The production capacity of about 38 GW P type has been fully converted, and TNC batteries account for more than 80% of the monthly production. Meishan's 16GW TNC new battery production capacity was put into operation as scheduled. Shuangliu's 25GW TNC production capacity is expected to be fully put into operation before the end of the year. At that time, the TNC battery production capacity will exceed 100GW. Components: Achieved 18.67 GW of component sales, an increase of 108.36% year over year. The G12 and G12R series large-format component products were successfully developed and mass-produced on a large scale. Among them, the mass production power of the G12 series 66 version products exceeded 700W, and the G12R 48 version double glass lightweight components were launched to meet the needs of the distributed market, and products for differentiated application scenarios such as N-type marine light modules were simultaneously developed.

Farming efficiency continues to improve, and the feed industry is growing against the trend

2024H1, the market situation in the feed industry, especially the aquatic feed industry, is grim. The company accurately controlled the essential needs of users from the raw material side, production side and market side, continued to improve aquaculture efficiency, and achieved a contrarian increase in aquaculture sales against the backdrop of a significant decline in the industry. The company has an annual feed production capacity of over 10 million tons, and its production and sales network covers most regions of the country and Southeast Asian countries such as Vietnam, Bangladesh, and Indonesia. The farming cycle was shortened by more than 30% compared to traditional factory shrimp farming, and the development of more than 30 new products for tilapia, cuttlefish and shrimp, and continued to promote the construction of a national marketing network in an orderly manner, driving a 7.63% year-on-year increase in food business sales and a 13.16% year-on-year increase in sales revenue. Among them, sales of pork products increased 23.76% year on year, and domestic aquatic product sales revenue increased 35.05% year on year.

Profit forecasting and valuation

The profit forecast was lowered and the “buy” rating was maintained. The company is a leading domestic photovoltaic company, reducing costs and increasing efficiency during the downturn of the industry. Considering the intensification of competition in the photovoltaic industry, the company's product profits are under pressure. As a leading company in photovoltaic silicon and battery modules, the company has outstanding technical and cost advantages. We lowered the company's profit forecast for 2024-2026 and maintained a “buy” rating. We expect the company's net profit to be -4, 3.77, and 5.47 billion yuan respectively in 2024-2026 (before the downgrade, it was 2.532, 6.082, and 9.127 billion yuan, respectively), corresponding to EPS of -0.89, 0.84, and 1.22 yuan, respectively The 2025-2026 PE was 23 and 16 times, respectively.

Risk warning

Increased competition in the photovoltaic industry; declining gross margin; international trade frictions; risk of exchange rate fluctuations