An established photovoltaic giant, breaking through the cycle of scientific and technological innovation. The company was listed on the Hong Kong Stock Exchange in November 2007. The total production capacity of rod-shaped silicon was 0.065 million tons in 2011, breaking the monopolies of Europe, America, South Korea, etc., and quickly occupied 27% of the global market share. In 2020, the strategic focus changed, and FBR granular silicon technology pushed photovoltaics from affordable prices to low prices. In 2023, the nominal production capacity of granular silicon reached 0.42 million tons, and the market share exceeded 15%, completely withdrawing from rod-shaped silicon production. The revenue growth in the photovoltaic materials business was excellent. The CAGR for 2019-2023 was 27.4%. Under the industry's countercyclical cycle, the performance was outstanding. Revenue for 23 years was 34.129 billion yuan, -7% year-on-year, and the revenue scale has increased significantly. The company continues to increase R&D. The share of the company's R&D investment in total revenue fluctuated from 2018 to 2023, reaching 5.6% in 23.

Demand for photovoltaics continues to grow, and profits are bottoming out at a low point in the industry. Domestic installed capacity exploded in '23, adding 216.30 GW of installed capacity, and demand grew beyond expectations. The industry has entered a phase of growth slowing. Demand is expected to grow steadily in the future, and the installed capacity will reach 490 GW in 24 years. Rising electricity prices in Sichuan, Xinjiang, Inner Mongolia and other regions are driving up silicon production costs, compounding the continuation of the downward price trend in the second quarter. It is expected that some companies will reduce operating rates, stop maintenance in the 3rd quarter, and be cleared in the next 1-2 years. Driven by favorable carbon reduction policies, the world added 404 GW of installed capacity in '23. Of these, China, the US, and Europe added 216/31/62 GW respectively, an increase of 147%/53%/33%, maintaining a high increase. With the full release of silicon production capacity in 2024, global installed demand is expected to increase by nearly 15-20% in 24-25.

Build a green hard technology matrix, and stand out from differentiated competition. Granular silicon: 1) The silane fluidized bed method has low electricity consumption and high conversion rate; 2) Long-term R&D investment has paid off. The company has achieved many major breakthroughs in supercooled hydrogenation technology in the past 17 years, such as cost reduction, granular silicon from scratch, and CCZ technology improvements. Various technologies have been nurtured over the years, and questions such as turbidity, carbon content, and hydrogen content have been solved one after another; 3) Production capacity and output are rapidly increasing, supporting market demand. The total production capacity is expected to reach 0.48 million tons by the end of 24, with an output of nearly 0.3 million tons;) Significant cost advantage, 20 years Electricity consumption can reach 1/3 of the Siemens method, and the comprehensive power consumption of granular silicon is optimized to less than 15 kWh/kg-Si; 5) Quality is improved rapidly, metal impurity content is reduced, downstream product conversion efficiency is improved, turbidity is improved, and breakage rate is increased. Perovskite: GCL nano perovskite components obtained T in '19? V certification completed the construction and trial production of a 100MW pilot line for the world's largest 1m*2m perovskite module in '21. The photoelectric conversion efficiency of single-junction perovskite modules reached 19.04%, and the conversion efficiency of laminated perovskite exceeded 26.34%, which is the leading level in the industry. It is expected to be built and implemented in 2024.

Profit forecast and investment rating: Based on the imbalance between PV supply and demand and pressure on industrial prices, we expect net profit to be 2.9/0.4/2.5 billion yuan in 2024-2026, corresponding to -214%/116%/454%, corresponding PE in 2025-2026; considering the cost advantages of the company's granular silicon products and the continuous introduction of products from downstream customers, the company's profitability and valuation are expected to have a large margin of flexibility. Covered for the first time, we will give a “buy” rating.

Risk warning: competition intensifies, policies fall short of expectations, global expansion falls short of expectations