The company released its report for the third quarter of 2024. The profit for the first three quarters fell 107.16% year on year; the company changed its Q3 profit from loss to profit, continued to grow, and had strong cost control capabilities; and maintained a buying rating.

Key points to support ratings

Results for the first three quarters of 2024 fell 107.16% year on year. The third quarter results changed from loss to profit: the company released the 2024 three-quarter report. The company achieved operating income of 54.348 billion yuan, a year-on-year decrease of 9.39%; realized net profit to mother -0.484 billion yuan; decreased 107.16% year over year, achieving net profit deducted from mother -0.594 billion yuan, a year-on-year decrease of 108.45%. According to the performance calculation, 2024Q3 achieved net profit of 0.39 billion yuan to mother, a year-on-year decrease of 80.02%, and changed from loss to profit from month to month.

24Q3's profitability increased significantly from month to month: in the first three quarters of 2024, the company achieved a comprehensive gross profit margin of 5.40%, a year-on-year decrease of 14.49 percentage points, and a comprehensive net interest rate of -1.58%, a year-on-year decrease of 13.19 percentage points. Among them, 2024Q3's profitability improved markedly, achieving a gross profit margin of 8.67% in the third quarter, an increase of 5.62 percentage points over the previous quarter, and a net interest rate of 2.07%, and an increase of 4.84 percentage points over the previous quarter.

Shipments continued to grow, and the share of N-type modules increased further: According to the company's disclosure, in the first three quarters of 2024, the company achieved battery module shipments exceeding 57GW, and the proportion of N-type modules shipped was about 63%.

Among them, the 2024Q3 company achieved 18.5GW of battery module shipments, and the proportion of N-type module shipments was about 75%, which gradually increased.

Accelerating the rise in N-type battery production capacity, the cost control effect is evident: according to the company's production capacity plan, the company's component production capacity will exceed 100 GW by the end of 2024, and the production capacity of silicon wafers and batteries will reach 80% of the module production capacity, of which the actual production capacity of N-type batteries will reach 70 GW. During the reporting period, production capacity of N-type batteries reached rapid production, and production costs dropped significantly. The company's ability to control costs on the manufacturing side is gradually reflected. According to the company's financial report, 2024Q3's battery module sales cost was about 0.84 yuan/W, down about 11% from the previous month.

We believe that as the company continues to reduce costs, it is expected that the company's profitability will be further enhanced.

valuations

Based on the current competitive situation in the industrial chain, the company's cost reduction efforts, and component price recovery expectations, we adjusted the company's 2024-2026 earnings forecast to -0.04/1.06/1.56 yuan (the original 2024-2026 forecast was 0.70/1.16/1.47 yuan), corresponding to a price-earnings ratio of -523.4/17.4/11.8 times; maintaining the purchase rating.

The main risks faced by ratings

International trade barriers risk; industry demand falling short of expectations; price competition exceeding expectations; PV policy risk; cost reduction falling short of expectations; technical cost performance falling short of expectations.