Key investment points

The leading welding belt company is leading, and short-term profits are under pressure: The company is a leader in photovoltaic welding belts, continues to cultivate the welding belt industry, and actively develops various types of welding belts in line with changes in photovoltaic cell technology. The company achieved revenue of 2.48 billion yuan in 24Q1-3, an increase of 21%, and achieved net profit of 0.046 billion yuan, a decrease of 61%. Of these, 24Q3 achieved revenue of 0.79 billion yuan, +5%/-19% of the same period, and realized net profit to mother 0.01 billion yuan, -77%/690% year-on-month, mainly due to weakening downstream demand, intense industry competition, and a decline in processing costs.

Shipments remained flat in 24Q3, and the new welder is expected to drive profit recovery. We estimate that the company shipped about 0.026-0.027 million tons of 24Q1-3 welding tape, of which the 24Q3 welding belt was estimated to be about 0.009 million tons, which was basically flat from month to month. At the same time, due to the slowdown in downstream demand and increased industry competition, the company's processing costs declined. The company's 24Q3 gross margin was 4.08%, down 9.1/2.3 pct from the same period last year. Q4 shipments are expected to be the same as Q3. At the same time, the company is actively developing and innovating to adapt to photovoltaic cells Technological changes led to the launch of a new multi-layer composite welding belt suitable for BC battery modules. This product is more difficult to process and more profitable, and is expected to restore the company's profits as the share of shipments increases.

The rate is relatively stable during the period. The company's rate for the 24Q1-3 period was 4.04%, a year-on-year decrease of 1 pct. Among them, the rate for the 24Q3 period was 4.56%, -1/+0.8pct year-on-month. The company's net operating cash flow for 24Q3 was -0.026 billion yuan, up 0.04 billion yuan from the same period last year. The company's inventory at the end of 24Q3 was 0.175 billion yuan, down 7% from the beginning of the year, and the contract debt at the end of 24Q3 was 0.005 billion yuan, up 144% from the beginning of the year.

Profit forecast and investment rating: Considering the strong short-term competitive pressure in the industry, we expect the company's net profit to be 0.06/0.12/0.18 billion yuan in 2024-2026, -60%/+105%/+47%, corresponding PE is 67/33/22 times. Considering the company's active development of new products, profits are expected to improve structurally, cover for the first time, and give a “gain” rating.

Risk warning: Competition is intensifying, and policies fall short of expectations.