The company announced that it achieved revenue for the first three quarters, net profit, deducting non-net profit of 8.202, -0.417, and -0.735 billion yuan, a year-on-year decline of 42.96%, 125.45%, and 146.74%. Among these, Q3 revenue for the single quarter was recorded as net profit and net profit of 1.828, -0.251, and -0.345 billion yuan.

Price adjustments in the industrial chain affect current performance, and the bottom reflects operational resilience. Prices in the photovoltaic industry chain were drastically adjusted, and the company's revenue and profit were clearly adjusted year on year. Companies at the bottom of the industry paid more attention to operating efficiency. Under the premise of continuing to promote new market expansion, Q1-3's total expenses fell by about 0.1 billion year on year. Non-recurring profit and loss were mainly due to subsidies, etc. In addition, assets such as inventory were depreciated by about 0.027 billion yuan in Q3. The company's current production capacity plans are all proposed in 2022 and before (the company is the first domestic Sanfang battery factory to achieve large-scale N-type mass production). As the two major domestic bases gradually put into operation, the company's fixed assets increased to 8.2 billion, and the projects under construction dropped to 0.56 billion. The focus of subsequent expansion is more on overseas and new technology.

The battery business performance is still superior to that of its peers. In the first three quarters, the company's battery shipments totaled 26.45 GW, an increase of 35.29% over the previous year. Of these, N-type shipments were 23.70 GW, accounting for 89.6%. The total number of N models shipped in Q3 was 7.3GW. Production of the P type was discontinued (the impairment was fully calculated in 2023), and the estimated W lost 2-3 points. Thanks to advantages in non-silicon cost control and battery efficiency and quality, the company's operating performance is still superior to that of its peers.

The forward-looking layout of manufacturing bases in the Middle East is expected to seize this period of opportunity once again. 1) The export ratio continues to increase: The company's overseas sales accounted for 4.69% in 2023, and the share of overseas sales rose sharply to 18.46% in the first three quarters of this year. In particular, it led the market share in India, Turkey, Europe, etc., and overseas contributions were gradually reflected. 2) Forward-looking layout in the Middle East: In June of this year, the company announced that it plans to invest in the construction of high-efficiency photovoltaic cell production capacity in Oman. The first 5GW phase is expected to start construction within the year and put into operation in mid-2025. The Oman project terminal is mainly aimed at the North American and European markets. There is a large gap in battery manufacturing in the US and Europe, and it is also difficult to form an effective battery supply in the short term. There is a clear gap in cells in high-value markets such as the US; it is expected that the company's production capacity in the Middle East will receive excessive returns.

The battery will be quickly marketed and is expected to be the first to achieve balance. Due to the rapid market switch to N type in the past year, the P type battery production capacity has been drastically reduced. At the same time, there is a big difference in the efficiency and cost of N-type batteries from different companies (the difference between the first-tier and industry average is 1-2 points, and the maximum is 3-4 points from the tail). Battery companies have started construction in the second half of the year. Over the past 2 years, new entrants of the second- and third-tier battery factories have gradually downgraded production or stopped production, and even resold assets. Considering factors such as profitability and energy consumption restrictions on new production capacity, additional production capacity will be relatively limited in the future, and the cell sector in the main photovoltaic material is expected to take the lead in achieving a balance between supply and demand.

Microscopically, since October of this year, the low-inventory battery segment has risen from 0.26 yuan/W at the bottom to around 0.28 yuan/W now, leading to an inflection point in price.

Investment advice: Batteries are the most effective part of market clearance of production capacity, and are expected to be the first to get out of this cycle. At the same time, during the industry adjustment period, the company took the lead in expanding overseas markets, and is expected to enter the harvest period in 2025. The company's profit forecast is adjusted in consideration of price changes in the industrial chain, and the highly recommended rating is maintained.

Risk warning: Industry demand falls short of expectations, overseas progress falls short of expectations, trade policy adjustments.