The leading domestic aluminum alloy photovoltaic glass manufacturer, had impressive revenue performance in the first half of the year. The company is one of the leading manufacturers of aluminum alloy photovoltaic structural components in China. Its main products include photovoltaic frame products, integrated photovoltaic building products (BIPV), and photovoltaic bracket structural components. In the first half of 2024, the company achieved operating income of about 3.533 billion yuan, +41.36% year-on-year, net profit of 0.177 billion yuan, or +3.89% year-on-year, after deducting non-return net profit of 0.145 billion yuan, or -9.22% year-on-year. The company's profit in Q2 2024 improved significantly compared to the previous quarter, achieving revenue of about 2.054 billion yuan, or +38.92% over the previous quarter.

The core business photovoltaic frame grew rapidly, and the cost rate was well controlled during the period. In the first half of 2024, driven by sales growth, the company's photovoltaic frame products achieved revenue of about 3.473 billion yuan, +46.48% over the same period last year, growing rapidly. Affected by intense competition in the industry, the gross margin of PV frames fell 4.9pct to 6.88%. The PV frame business accounts for 98.29% of the company's business revenue, contributing to the company's main source of revenue. The company's expense ratio was well controlled. The sales, management, finance, and R&D expenses rates were 0.32%, 0.91%, 1.02%, and 1.30% respectively, totaling 3.55%, which remained low.

The production capacity of photovoltaic glass is strong, and plans to expand production capacity continue to advance. In the context of “double carbon”, the installed capacity of photovoltaics continues to rise. Based on the estimated 345 GW of new global PV installations in 2023, the annual demand for photovoltaic frames is about 2.15 million tons, and the company's market share is about 10.73%. Demand for PV frames is expected to continue to rise as PV installed capacity grows in the future. At present, the company has five major production bases in Changzhou, Jiangsu, Yingkou in Liaoning, Chuzhou in Anhui, Wuhu in Anhui, and Vietnam. Under the production expansion plan, the Wuhu base is in the production capacity climbing stage, and the Vietnam base is in the equipment commissioning stage. When production capacity is fully released, the annual production of photovoltaic aluminum frames can reach 0.69 million tons. The production capacity is strong enough to meet future growth demand, and the market share is expected to increase further.

The company's customer resources are rich and stable, and it has entered the leading component supply chain system. Adhering to the business philosophy of “creating value for customers”, the company has now entered the supply chain system of several leading PV module manufacturers, and customer partnerships are stable. Since 2021, the company's top five customers have been Jingao Technology, Artes, Longji Green Energy, Tianhe Solar, and Tongwei shares, accounting for 85.74% of total revenue in 2023.

In addition, the company is also increasing its market development efforts and continuously developing high-quality customer resources.

Investment advice: We expect the company to achieve revenue of 8.11/12.899/16.642 billion yuan in 2024-2026, net profit to mother of 0.386/0.414/0.583 billion yuan respectively, EPS of 1.63/1.74/2.46 yuan, and PE of 14/13/9 times, for the first time coverage, giving it a “recommended” rating.

Risk warning: PV installed demand falls short of expectations; market competition intensifies; raw material price fluctuation risk.