TopCon's leading enterprise, leading the development of the industry through continuous technological iteration. The company is a leading TopCon company. It is one of the first TopCon companies in the industry to expand production on a large scale, and continues to lead the technological progress of the battery industry. The company continues to upgrade and iterate TopCon battery products at TopCon. The latest products integrate many cutting-edge technologies, fully introduce the LP double insertion process, and use first-generation and second-generation laser improvement technology, which is expected to increase the mass production efficiency of TopCon batteries from about 25% at the beginning of 2023 to 26% by the end of the year, and will maintain TopCon's leading edge for a long time in the future.

Competition in the industry has intensified, and leading companies have benefited from accelerated clearance. Previously, the accelerated release of TopCon battery production capacity led to high short-term competitive pressure on the industry and serious losses in the battery sector; looking ahead, in the context of tightening financing, the financial pressure on new entrants and small manufacturers will gradually expand, more projects will be terminated, transferred, and sold, and the industry reshuffle continues. It is expected that the PV off-season will quickly clear up until the first quarter of 2025. The cell sector is expected to usher in an inflection point in the industry, and leaders are expected to benefit significantly.

Go to battle lightly and be the first to complete PERC asset accrual. With the rapid increase in demand for N-type products in the industry, the profitability of P-type batteries declined markedly. The company's P-type battery assets were less than 10GW. Considering changes in the product structure, assets related to P-type PERC batteries were fully depreciated in 2023, and the company's P-type PERC equipment assets were cleared. Therefore, the company's current production capacity structure is mainly N-type, and the production capacity and asset structure have been further optimized, which is conducive to future performance growth.

Build overseas factories and go through the cycle. Currently, domestic cell profit pressure is high. In response to the growing demand in the overseas PV market, the company continues to explore overseas customers and build an overseas sales network. The share of overseas sales increased to 13.8% in the first half of 2024, achieving a significant increase. Furthermore, considering the current US AD/CVD policy investigation of the four Southeast Asian countries, the company is the first in the industry to propose a factory layout in the Middle East, establish an overseas price system, and lead the industry through the cycle.

Profit forecast and valuation rating: We predict that the company's 2024/2025/2026 operating income will be 11/17.3/19.5 billion yuan, respectively, the net profit to mother will be -0.46/0.85/1.14 billion yuan, EPS will be -2.0/3.7/5.0 yuan respectively, and the PE multiples corresponding to the company's current stock price forecast EPS will be 13/9 times in 2025/2026. We are optimistic about the company's technology and cost advantages, product price elasticity, overseas layout and asset quality. Comparable companies were given an average of 20.6 times PE in 2025, and the corresponding target market value was 17.5 billion, which covered the “buy” rating for the first time.

Risk warning: risk of price fluctuations in the industrial chain; risk of technological progress falling short of expectations; risk of insufficient production capacity investment; risk of increasing industry competition; risk of market size estimation falling short of expectations; risk of untimely updating of information data used in research reports, etc.