3Q24 met our expectations

The company's 1Q-3Q24 achieved revenue of 71.77 billion yuan, a year-on-year decrease of 15.66%; of these, 2024Q3 achieved revenue of 24.519 billion yuan, a year-on-year decrease of 80.88%; among them, achieved revenue of 24.519 billion yuan, a year-on-year decrease of 22.09% and a month-on-month increase of 1.45%; net profit to mother 0.015 billion yuan; net profit of 0.259 billion yuan after deducting non-return mother net profit, which is in line with our expectations.

Development trends

Business level: 2024Q3, the company shipped 23.8 GW of components, which was basically flat from month to month, and the leading position was stable. Among them, 3Q24 US shipments exceeded 3GW, mainly due to an increase in the proportion of centralized delivery, which increased significantly by 1.2 GW over 2Q, helping to increase unit profit from 0.015 yuan/W in 2Q to 0.027 yuan/W in 3Q. After that, delivery prices in high-price markets other than the US declined, and gross profit faced some pressure, but as the overall inflection point of the PV industry approaches, we expect the operating situation to continue to improve in 2025.

Cash flow level: As of 3Q24, the company's current monetary capital was 26.668 billion yuan, cash+receivables > short-term debt+payables; net cash flow from operating activities was 1.255 billion yuan, which was positive from month to month; net cash flow from investment activities was -0.776 billion yuan, which continued to narrow from month to month; net cash inflow from financing activities was 8.661 billion yuan. In 3Q24, there was a net increase of 9.041 billion yuan in cash and equivalents, and operations remained healthy and steady. The company announced plans to issue a GDR listing in Germany, and we expect the capital structure to be further optimized.

Technical level: According to the company's official WeChat, the newly released TigerNeo3.0 technology improves the conversion efficiency of about 0.5 pct on the battery side through LECO upgrades, backside graphics, and passivation improvements. The silicon wafer end improves the lifespan of fewer children by introducing low oxygen technology, and the component side introduces 0BB+, which brings about a 5-10W power increase. The new technology will be mass-produced in 1Q25; in addition, research and development of new technologies related to copper paste is also planned.

We believe that the company will maintain its leading position in TopCon technology, have sufficient reserves for subsequent optimization solutions, and that the competitiveness of component products may continue to lead in the future.

Profit forecasting and valuation

Due to the pattern and industry trend where profits are concentrated, we kept our profit forecast for 2024 unchanged, raising our 2025 net profit forecast by 32% to 3.48 billion yuan; maintaining the industry rating. The inflection point of the industry is approaching, supply-side reforms are expected to accelerate the arrival of the inflection point in the industry and enhance the performance and valuation flexibility of leading companies. We raised our target price by 22% to 11 yuan, corresponding to the 19.6% increase space. This corresponds to 31.6 times P/E in 25, and the current market value corresponds to 26.5 times P/E in 2025.

risks

Demand falls short of the expected risk, and the implementation of supply-side policies falls short of the anticipated risk.