Silicon: The industry clean-up cycle brings about pattern reshaping, and the company strengthens its position with cost and customer advantages. Currently, the polysilicon industry is in the clean-up stage. The company has further deepened its deep binding with downstream core customers through long-term equity cooperation and other models. The unit cost remains industry-leading, the unit comprehensive electricity consumption has been reduced to less than 50 degrees, silicon consumption has been reduced to less than 1.04 kg/kg-Si, and various production consumption indicators continue to be optimized. In the first half of '24, silicon sales volume was 0.2289 million tons, and the year-on-year growth still reached 28.82%. We believe that at the bottom of the industry cycle, companies that lack cost and sales guarantees will gradually exit, and the company's leading position will gradually withdraw. Strengthen and lead the next round of growth.

Cell: The next round of technological innovation is worth looking forward to, and the company's new technology is ready to go. On June 6, '24, the first battery of Tongwei Global Innovation R&D Center was successfully launched. The first battery technology launched this time comes from the GW grade copper interconnect pilot technology developed independently by Tongwei over a period of two and a half years. As of 24H1, the average power of the 1GW pilot line has exceeded 735W, the A grade rate of the entire line is over 97%, the fragmentation rate is less than 0.5%, and the operating capacity of the production line is close to 100% of the theoretical production capacity. The company plans to export HJT+ copper interconnect solutions with Tongwei characteristics by the end of 2024. In addition, the company has also made positive progress in research and development of new battery technologies such as XBC and perovskite/silicon laminates. We believe that there are opportunities for technological iteration in the battery sector, and the company is expected to lead the next round of growth with the rapid implementation of new technology.

Components: Firmly integrate strategic planning, and open up a new development situation for the component business. In 23, component shipments reached 31.11 GW, ranking 5th in the world in terms of shipment volume. In the first half of '24, component sales were 18.67 GW, up 108.36% year over year. The company has obtained more than 20 national market certifications and introduced internationally renowned customers. With the continuous improvement of the company's overseas channels, the overseas influence and share of Tongwei components continues to increase steadily. We believe that the rapid growth of the component business reflects the firm implementation of the company's business strategy. The rapid development of the component business will help open up a new situation of the company's downstream expansion and form good collaboration with upstream silicon materials and batteries.

Profit forecast and valuation analysis: In 2024-2026, we expect the company's net assets per share to be 1.175/1.265/1.438 billion yuan, and the corresponding PB is 1.56, 1.45, and 1.28 times, respectively. Referring to the average PB of comparable companies, we gave the company 1.8-2.0 times PB for 25 years, with a corresponding reasonable value range of 22.78-25.31 yuan. For the first time, coverage gave a “superior to the market” rating.

Risk warning: New technology research and development falls short of expectations; new business layout falls short of expectations; product price fluctuations; policy risks; risk of declining performance; demand falls short of expectations; risk of raw material price fluctuations.