Incident: On October 30, 2024, the company released its 2024 three-quarter report. In the first three quarters of 24, the company achieved operating income of 8.202 billion yuan, a year-on-year decrease of 42.96%, achieved net profit attributable to shareholders of listed companies -0.417 billion yuan, a year-on-year decrease of 125.45%, and realized that shareholders belonging to listed companies withheld non-net profit of -0.735 billion yuan, a year-on-year decrease of 146.74%; corresponding to the third quarter, achieved revenue of 1.828 billion yuan, a year-on-year decrease of 1.828 billion yuan. At 31.27%, net profit due to mother was -0.251 billion yuan, down 34.62% from the second quarter, and net profit without return to mother was -0.345 billion yuan, down 57.15% from the second quarter, and performance bottomed out at an accelerated pace.

Domestic competition has intensified, and the shipping structure has been actively adjusted. In the first three quarters of 2024, the company achieved a shipment volume of about 26.45 GW of photovoltaic cell products, an increase of about 35.29% over the previous year. Of these, N-type batteries shipped 23.70 GW, accounting for 89.60%. Shipments in a single quarter are expected to correspond to about 7.24 GW in the third quarter, down about 20% from the second quarter. It is estimated that the company's photovoltaic cell business lost 3.4 cents per watt in the third quarter, and the loss increased by 1.4 cents compared to the second quarter. It is estimated that it is mainly due to poor production schedules at downstream module manufacturers, compounded by weak demand compounded by increased competition, leading to price declines. Under pressure from the accelerated clearance of domestic supply, the company actively adjusted its market structure and continued to explore overseas markets with large gaps in battery production capacity. Through continuous development and certification of customers in emerging markets such as Asia, Europe, North America, Latin America, Australia, etc., the share of overseas sales increased dramatically from 4.69% last year to 18.46% in the first three quarters of 2024, seizing the first-mover advantage in overseas markets.

Technological iterations continue to advance, and high-quality production capacity is scarce in Oman. The company is deeply involved in the continuous optimization and upgrading of N-type TopCon battery process technology. Through the exploration and introduction of multiple efficiency and cost reduction measures such as metal composite reduction, passivation performance improvement, grid thinning, and 0BB technology, the company continues to improve battery conversion efficiency and reduce non-silicon costs. The new product innovatively superimposes J-HEP half-chip edge passivation and J-WBSF wave backfield technology. The double-sided ratio has reached 90%, and the battery product conversion efficiency has exceeded 26.3%, which is at the leading level of the industry. In order to further consolidate its overseas advantage, according to the announcement on November 1, the company's 5GW high-efficiency battery production base project in Oman has signed a “Land Lease Contract” with SOHAR FREE ZONE LLC (Sohar Free Trade Zone Co., Ltd.) and signed a “Memorandum of Understanding” with a North American leading component company. For future Omani high-efficiency battery production capacity, the head component company intends to purchase 1GW-2GW high-efficiency batteries in 2025. As a scarce overseas photovoltaic cell asset, the implementation of the Oman project will help the company make full use of Oman's location resource advantages and utilize the company's core technical advantages of photovoltaic cells to meet the needs of high-value markets such as Central and Eastern Europe, and enjoy overseas premiums and profit flexibility.

Investment advice: The company is expected to achieve operating income of 10.754 billion yuan, 13.479 billion yuan and 15.053 billion yuan respectively in 2024-2026, and realized net profit to mother of -0.546 billion yuan, 0.878 billion yuan, and 1.096 billion yuan, respectively, with year-on-year increases of -166.9%, 260.9%, and 24.9%. Corresponding EPS is -2.39, 3.84, and 4.80 yuan respectively. The current stock price corresponds to 2025-2026 PE multiples of 19.3X and 15.5X, respectively. The photovoltaic industry chain is entering the backstage of the production capacity cycle within the industry. Prices in all parts of the industry chain are gradually stabilizing, compounded by strengthened guidance from industry associations and relevant authorities. Industry supply and demand are expected to return to a healthy development path. The company's efficient TopCon battery production capacity scale and conversion efficiency continues to lead. The recovery of the industry has brought performance recovery, actively enjoyed dividend premiums, and maintained the “increase” rating.

Risk warning: storage and installation alone fall short of expectations, risk of fluctuating raw material costs, risk of overseas exchange, risk of increased industry competition, etc.