The company's recent situation

We surveyed the company on November 8. The company exchanged views on annual shipping expectations, BC battery paste, and progress in less silver and no silver conversion. Previously, the company released its three-quarter report after the market on October 29. The company's revenue for the first three quarters was 11.51 billion yuan, +88.8% year over year, and net profit to mother was 0.29 billion yuan, which was the same year on year. After deducting net profit of non-return to mother of 0.41 billion yuan, +65% year over year, in line with market expectations.

reviews

Guidelines for maintaining PV silver paste shipments throughout the year. In the first three quarters of 2024, the company shipped 1,581 tons of photovoltaic silver paste, +41.4% over the same period. Of these, N-type Topcon shipped 1386.4 tons, accounting for 87.66%, and the company's TopCon paste market share exceeded 40%. The company shipped 449.6 tons of silver paste in the third quarter. The month-on-month decline was mainly due to a decline in the operating rate of downstream batteries and a focus on core customers due to careful shipping considerations. Among them, type N accounted for 88.6%. The company maintained the previous annual shipping guidelines of 2000-2,500 tons, +16.7% to 45.9% over the same period last year.

BC battery paste is leading the industry in terms of progress. The company achieved large-scale supply of BC battery paste in 2020. Currently, the company's product performance, market share and new technology reserves of a full range of BC battery pastes, such as N-poly, P-poly, and main grids, are in the leading position in the industry. It is already the main supplier of leading BC battery companies, and is also actively developing and introducing potential customers. It is a reference slurry supplier for many BC customers developing and testing lines. We estimate that since September, the BC industry's monthly output has reached 2-3 GW. Next year, the two leading companies are expected to ship more than 50 GW in total. In terms of processing costs, we estimate that the processing fee for a single kilogram of BC battery paste is more than 1,000 yuan (TopCon is currently around 500 yuan), and BC emissions are expected to increase the company's profits.

Silver-coated copper has been mass-produced on a long-term basis, and attention is being paid to the progress of copper paste. According to the company announcement, the company is actively deploying various low silver/silver free conductive paste technologies. In the field of silver coated copper, the company has achieved long-term large-scale mass production of silver coated copper with 50% silver content, and has also entered large-scale mass production of silver coated copper with 30% silver content, and continues to develop and promote ultra-low silver content silver coated copper technology. In terms of pure copper paste, the company cooperated with leading enterprises in the industry to develop pure copper paste technology earlier, focusing on copper powder preparation and anti-oxidation technology development. The product technology level is in the leading position in the industry, and continues to cooperate with leading customers and industry chain partners to develop overall application solutions to optimize performance, mass productivity, ease of use and reliability.

Profit forecasting and valuation

Maintain the 2024/2025 profit forecast of $0.57/0.76 billion. Maintaining an outperforming industry rating, considering the recent rise in the PV sector's valuation center, BC battery volume, and paste technology iterations, we raised our target price by 71.4% to 72 yuan, corresponding to 17.8/13.3 times P/E in 2024/2025. There is 43% room to rise compared to the current stock price. The current stock price corresponds to 12.4/9.3 times P/E in 2024/2025.

risks

Technology iteration falls short of expectations, downstream battery production schedule falls short of expectations, and accounts receivable recovery risk.