Incident: On August 21, 2024, the company released its performance report for the first half of 2024. During the reporting period, the company achieved revenue of 3.53 billion yuan, +41.4% year over year; net profit to mother of 0.18 billion yuan, +3.9% year on year; deducted non-net profit of 0.14 billion yuan, or -9.2% year on year. Among them, Q2 achieved revenue of 2.05 billion yuan, +59.6% YoY, +38.9% month-on-month; net profit to mother 0.11 billion yuan, +1.7% YoY, +62.5% month-on-month; deducted non-net profit of 0.1 billion yuan, -6.3% YoY and +100.4% month-on-month.

The leading photovoltaic frame company firmly implements the big customer strategy. The company's main products include photovoltaic frames, BIPV and photovoltaic bracket structural components. According to CPIA statistics, the new global PV installed capacity in 2023 was 390 GW, and the corresponding demand for photovoltaic frames was about 2.43 million tons, and the company's market share was about 9.5%. The company has four major production bases in Changzhou, Jiangsu, Yingkou, Anhui, and Wuhu, Anhui, which can produce 0.24 million tons of photovoltaic frames per year. Currently, the company's Wuhu PV frame production capacity of 0.27 million tons is under construction, and plans to build a new 0.18 million ton frame production capacity in Vietnam, with a total production capacity of 0.69 million tons after completion. The company adheres to the big customer strategy. The company's top five customers in 2023 are Jingao Technology, Artes, Longji Green Energy, Tianhe Solar, and Tongwei shares, accounting for 86% of total revenue. The risk of bad debts in the company's accounts receivable is low. Relying on steady management, the market share is expected to increase steadily at the bottom of the industry cycle.

The PV frame business achieved high growth, and the cost rate remained low during the period. In 2024, H1's photovoltaic frame business achieved revenue of 3.47 billion yuan, +46.5% year-on-year, achieving high growth; 2024H1 PV frame revenue accounted for 98.3%, up 3.4 pct from 2023; gross margin was 6.9%, 4.9pct year on year, mainly due to high competitive pressure in the industry. In 2024, the total sales, management, finance, and R&D expenses ratio of H1 company was 3.6%, +0.6pct year-on-year, maintaining a low level.

Investment advice: The company insists on implementing the big customer strategy, has a strong ability to withstand risks at the bottom of the industry cycle, and its market share is expected to increase steadily. We expect the company's net profit to be 0.392/0.426/0.494 billion yuan in 2024-2026, covered for the first time and given a “buy” rating.

Risk warning: demand for PV installed capacity falls short of expectations; industry competition increases risk; overseas policy risk.