Key investment points:

Company Overview: 1) Steady operation, global first-line component manufacturers span multiple cycles. The company was founded in 2007 and has been one of the world's leading component suppliers for many years. Through steady management, the company has successfully crossed the four-round industry cycle. Currently, the company is slowing down and is expected to cross steadily again. 2) Financial analysis: The industry's low performance is stable, and diversified businesses contribute to profit. The 2024Q1-Q3 company achieved revenue of 63.147 billion yuan, a year-on-year ratio of -22.16%, and achieved net profit to mother of -0.847 billion yuan. 2024 H1 Company/PV Systems/Smart Energy accounted for 69.95%/25.24%/3.56% of revenue, and gross margin was 11.13%/18.43%/23.22%.

Industry: 1) Supply and demand: Short-term conflicts have emerged, and industry self-discipline is expected to drive production capacity clearance. Demand side growth remains unchanged in the long term, and the short-term growth rate is slowing down. Significant supply-side production expansion has caused industrial chain prices to fall below costs, and policies and industry self-discipline are expected to speed up the repair of supply and demand conflicts. 2) Industrial chain: The component end is long and snowy, and profit distribution is expected to be skewed. The current expansion of production capacity in all sectors fully meets market demand, the component sector pattern is stable, and strong barriers such as channels, brands, and global operations are expected to dominate.

Component business: More than 20 years of intensive cultivation to create a moat. 1) Sales and operation side: The long-term layout of the company's channel operation forms a global structure, has significant brand value, and establishes a dominant position in the long-term supply chain in the supply chain. 2) Production and sales: The company ranked in the top three in the world for 12 consecutive years. In 2024Q1-Q3, the company shipped 50.50 GW of components, and is expected to ship 70-75 GW for the whole year. Integrated production capacity is at the forefront of the industry, and the layout is reasonable and accurate to go overseas. It is expected that by the end of 2024, the production capacity of the company's photovoltaic wafers/cells/modules will reach 55GW/105GW/120GW respectively, and the Indonesian and US bases are expected to be put into operation by the end of the year.

Diversified businesses: Collaborative development contributes to performance. 1) Support: Technology+brand channel+intelligent platform, business ushered in a period of growth.

In 2018, the company acquired the bracket business overseas, forming a dual advantage in international industrial layout and technology. In 2023, the company's tracking bracket shipments reached 6th place in the world and 2nd in China, accounting for about 6% of global shipments. 2) Distributed systems: distributed system leaders, with extensive operation and maintenance business. The subsidiary Tianhe Fujia was founded in 2016 and is ranked in the top 2 in the world, with a market share of about 20% in the domestic household market. The operation and maintenance business contributed a new increase. As of the end of September, the company's distributed power plant operation and maintenance scale was 15.2 GW.

3) Energy storage: Optical storage collaboration, moving towards a period of rapid development. The company's energy storage business began layout in 2015, and has deep accumulation in terms of production capacity, products and channels. 2024q1-Q3 energy storage shipped 2.55 GWh, and is expected to ship 5 GWh throughout the year.

Investment advice: We predict that the company's net profit for 2024-2026 will be -0.623/2.335/4.025 billion yuan, EPS will be -0.29/1.07/1.85 yuan/share, respectively. The PE corresponding to the current 2024-2026 stock price will be -67.49 times/18.01 times/10.45 times, respectively, and the corresponding PB will be 1.37 times /1.28 times/1.11 times, respectively. As a photovoltaic module, the company benefits from advantageous barriers such as brands, channels, and international layout. At the same time, the company's business is diversified and underdeveloped, and sectors such as scaffolding and energy storage contribute to performance. It is expected that leading advantages will continue to be highlighted in the process of clearing the industry's production capacity. First coverage, giving a “buy” rating.

Risk warning: risk of PV installed growth falling short of expectations; risk of global policy risk; risk of price fluctuations in the industrial chain.