Focus on high-quality enterprises in the middle and downstream of optical storage. With 2024H1, the company achieved operating income of 8.113 billion yuan, a year-on-year increase of 44.73%; realized net profit to mother of 43.3344 million yuan, a year-on-year decrease of 61.15%. 2024H1, all links in the photovoltaic industry chain have a phased and structural process of losing production capacity. Product prices continue to fluctuate, industry competition intensifies. The company deeply explores the domestic market and adjusts order acceptance strategies. 24H1 achieved the highest domestic bid scale and module operating rate in the industry, and module shipments and operating income increased dramatically year on year; however, due to module product price adjustments, the company's net profit declined year on year.

The photovoltaic industry is in the bottom range, and N-type iterations are accelerating. 1) Demand for photovoltaics continues to improve, and industry prices are at the bottom due to loose supply. Demand for PV continues to improve, and we expect the world to add 500 GW of new PV installations in 2024. Industry competition has intensified under supply easing, and industrial chain prices are at the bottom, but fluctuations caused by phased supply and demand mismatches will not change the long-term positive trend of industry development. As backward production capacity is gradually cleared, and relevant national authorities, local governments and various industry players work together to promote the high-quality and healthy development of the photovoltaic industry, prices in various industrial chains in the photovoltaic industry are expected to gradually return to normal levels. 2) N-type cell iteration is accelerating, and the component industry is fiercely competitive. According to CPIA statistics, N-type cells accounted for about 26.5% in 23; N-type iterative acceleration in 24 years, according to Infolink's forecast, the proportion of N-type cells may reach 79% in 24 years. According to Solbi Photovoltaic Network, 24Q1 modules shipped over 55% CR4 and CR10 close to 86%. The concentration of modules has increased, and competition in the industry is fierce.

The N-type has obvious advantages in large production capacity, and the collaborative development of optical storage can be expected. 1) With N-type large-scale production capacity, product, brand and channel advantages are remarkable. The company is forwardly eliminating backward production capacity in the industry, and the production capacity of large-size high-efficiency modules and N-type TopCon batteries has been steadily expanding. As of August 2024, the company has 30GW of high-efficiency large-size module production capacity and 14GW large-size TopCon battery production capacity; since 2022, the company's module shipments have resumed growth, and 2024H1's PV module shipments rank in the top eight in the world. The company adheres to technological innovation, and has accumulated over many years, and has obvious product, brand and channel advantages; in addition, the company has launched carbon chain products, which have obvious low-carbon advantages. 2) System integration is progressing steadily, and the energy storage business is booming. 2024H1, the company's system integration performance doubled, and various businesses made comprehensive breakthroughs; in 2023, the company's energy storage business achieved the establishment of sales channels and initial accumulation of performance, achieving more than 1 GWh of energy storage projects throughout the year. The domestic business met the bidding qualifications for large-scale grid-side and power-side energy storage projects; the overseas business used the OEM+ self-developed product model, and the products passed 26 international certifications.

Investment advice: We expect the company's 2024-2026 revenue to be 19.772/28.487/38.027 billion yuan, respectively, with corresponding growth rates of 23.8%/44.1%/33.5%, and net profit to mother of 0.077/0.403/0.621 billion yuan, respectively. The corresponding growth rates are -51.4%/425.9%/54.0%, respectively. Based on the closing price on September 20, the corresponding PE is 136X/26X/17X. The company is lightweight and has an obvious advantage in large N-type production capacity. The collaborative development of optical storage can be expected, covered for the first time, and given a “careful recommendation” rating.

Risk warning: Policies fall short of expectations, prices fall beyond expectations due to increased competition in the industry, new production capacity/new technologies fall short of expectations, fluctuations in raw material prices exceeding expectations, risk of asset impairment, etc.