occurrences

On October 30, 2024, the company released its 2024 three-quarter report. According to the announcement, the company achieved operating income of 6.005 billion yuan in 24Q1-Q3, or -53.37%; net profit to mother -1.099 billion yuan, -121.49% year-on-year; net profit after deducting non-attributable net profit of -1.171 billion yuan, or -124.18% year-on-year.

On a quarterly basis, the company achieved operating income of 1.421 billion yuan in 24Q3, -60.01% year on month; net profit to mother -0.429 billion yuan, -162.27% year on year, +57.13% month on month, net profit without return to mother was -0.477 billion yuan, -214.47% year on year and 54.46% month on month. The pressure on the company's performance is mainly due to an imbalance between supply and demand in the photovoltaic industry, excess supply in the silicon sector, and low prices.

The proportion of N-type materials remains high, and the cost control ability is excellent

Facing the severe industry situation, the company responded positively to market demand, relied on the comprehensive strength of product quality, brand reputation and sales strategies, and established an efficient and flexible production regulation mechanism to ensure a close link between production and sales. 24Q3's polycrystalline silicon output reached 0.044 million tons (0.033 million tons of N type, accounting for 75.1%), and achieved sales volume of 0.042 million tons (0.033 million tons of type N, accounting for 79.4%), and the production and sales rate reached 96.6%. It has demonstrated good market adaptability and operational efficiency.

In terms of cost, in the downward cycle of the industry, the company continued to improve production efficiency, reduce energy consumption, and continue to optimize costs. 24Q3's cash cost was 38.93 yuan/kg, -3.1% month-on-month. Due to the discontinuation of production of some old devices and a month-on-month decline in production, the fixed cost per unit rose. The company's 24Q3 unit cost was 48.83 yuan/kg, +6.3% month-on-month.

Good cash reserves are expected to help the company get through the cycle

In terms of cash reserves, as of 24Q3, the company's bank deposits and notes receivable balances were 4.18 billion yuan, and the efficiency of capital use was improved through structured deposits and term deposits. The total balance of deposits+accrued interest at the end of the period was 10.31 billion yuan, and the total balance above totaled 14.49 billion yuan. Good cash reserves are expected to protect the company through the industry cycle.

Investment advice

The company's revenue for 24-26 is expected to be 7.394/13.394/16.232 billion yuan, respectively, and net profit to mother is -1.409/0.865/1.68 billion yuan, respectively, and the corresponding PE is 80x/41x in 25-26. The company is a leading company in the silicon industry. Good cost control capabilities and excellent product quality are expected to help the company go through the cycle and maintain the “recommended” rating.

Risk warning

Downstream demand falls short of expectations, market competition increases risks, inventory asset depreciation risks, etc.