Core views

On October 25, the company released a business update for the third quarter of 2024. The loss attributable to unaudited owners for the third quarter of 2024 was -1.492 billion yuan, and the unaudited loss attributable to owners for the first three quarters of 2024 was about 2.971 billion yuan.

Cash costs continue to fall, and a recovery in capacity utilization is expected to drive costs down further. In the third quarter of 2024, the company produced 0.062 million tons of granular silicon, shipped 0.0809 million tons, the sales price including tax was 32.75 yuan/kg, and the production cash cost was 33.18 yuan/kg. Cash costs for granular silicon continued to decline in 2024. 2024Q3 cash costs decreased by 12.32% compared to 2024Q1 and 5.71% month-on-month.

We believe that with the completion of the company's technical reforms and the capacity utilization rate bottomed out and rebounded, the company's granular silicon costs are expected to continue to reach new lows.

The carbon footprint of the Leshan base was reduced by 33%, setting a new global industry record. According to the company's official account on September 23, the granular silicon at the company's Leshan base has obtained carbon footprint certification from the French Environmental and Energy Control Agency (ADEME). The carbon emissions per kilogram of granular silicon are only 24.913 kg of carbon dioxide equivalent. Compared with the carbon footprint value of 37.000 kg of carbon dioxide equivalent in Xuzhou base in 2021, it has drastically decreased by 33%, once again setting a new global industry record. At the same time, GCL Technology's Leshan base used 100% clean energy in the granular silicon production process and obtained a “Clean Energy Consumption Certificate” issued by the Sichuan Electric Power Trading Center. Next, the company will be marked by the launch of GCL's SiRo carbon chain module, all using GCL's granular silicon as a raw material. Using GCL's first photovoltaic carbon chain, the GCL Carbon Chain, it can provide full life cycle supply chain traceability, product and organizational carbon footprint management, and real-time ESG report inquiry services, leading the entire industry chain to jointly reduce carbon and decarbonize. We believe that after implementing policies related to carbon tariffs/carbon emissions, the low-carbon advantages of granular silicon will be reflected, and the competitive advantages of products will be further highlighted.

Investment advice

Due to the decline in polysilicon prices, we expect the company's revenue for 2024-2026 to be 17.057 billion yuan, 30.523 billion yuan, and 42.118 billion yuan, respectively, -49%, +79%, and +38% year-on-year respectively. Net profit to mother was -2.921 billion yuan, 1.544 billion yuan, and 4.326 billion yuan, respectively, -216%, +153%, and +180% year-on-year, respectively. The stock price on October 28 was 30 and 11 times PE in 2025 and 2026, respectively. Maintain a “buy” rating. We are optimistic that the company's granular silicon costs will continue to decline and quality will improve. With the gradual recovery of polysilicon prices, the company's profitability will be restored.

Risk warning

Downstream demand falls short of expectations, market competition intensifies, overseas progress falls short of expectations, customer concentration is high