Incidents:
On August 25, 2023, the company released the “2023 Semi-Annual Report”. During the reporting period, the company achieved revenue of 4,032 billion yuan, an increase of 14.02% over the previous year, achieved net profit of 899 million yuan, an increase of 15.46% over the previous year, and achieved net profit of 861 million yuan, an increase of 11.6% over the previous year.
Performance is growing steadily, reducing costs, increasing efficiency, and reducing cost rates
23H1 achieved a gross profit margin of 40.55% and a net interest rate of 22.3%. This was -3.58pct/+0.31pct, respectively, year-on-year, mainly due to the successive integration of affordable operating projects.
The company's sales rate/management rate/R&D rate/financial rate were 0.44%/2.33%/2.37%/7.79%, respectively. The year-on-year changes were +0.15/-0.13/+0.57/-4.92 pct, respectively. The company has expanded sales efforts in overseas markets, and overseas warehousing expenses have increased sales rates; the company continues to refine management, reduce costs and efficiency, and reduce management rates; continues to increase research and development of new technologies for photovoltaic cells, and R&D rates have increased; the company has issued green bonds and returned some loans after payment of arrears, and financial rates have been reduced.
Expanded production boosts module sales volume and increases gross margin
According to data from the National Energy Administration, in January-July, the PV installed capacity increased by 97.16 GW, up 59.43 GW from the previous year. The price of raw materials dropped plus the high installation targets of each province boosted the increase in module sales volume. The company's current production capacity of 5GW (high-efficiency battery production capacity 1.5 GW, high-efficiency component production capacity 3.5 GW) supports the company's performance. The company's 23H1 achieved revenue of 1,769 billion yuan for modules and other products, +36.29% year-on-year. The decline in silicon prices contributed to an increase of 9.07%, a year-on-year increase of 4.07pct.
The scale of power plants continues to increase, and project reserves are sufficient
The company's photovoltaic power plants are distributed throughout the country. As of 23H1, the company has 4.564 GW of power stations, 1,674 GW under construction, and is planning to build or acquire 2.866 GW of power plants, totaling about 9.104 GW (up 1.844 GW over the previous year). The company has locked in a total of about 17 GW of self-built or purchased projects in regions with good optical resources and good internet conditions. The reserves are abundant, and the performance continues to improve after the projects are put into operation and connected to the Internet. 23H1 has received 619 million yuan in electricity bill subsidies, of which China has paid 333 million yuan. Currently, the amount of compensation owed is 10.276 billion yuan. After all of the subsidies have been distributed, it can support about 7.6 GW of installed capacity based on 30% of capital.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income in 2023-25 to be 129.8/153.1/17.65 billion yuan respectively, with a corresponding growth rate of 40.54%/17.96%/15.28%, a net profit of 25.21/31.85/ 3.86 billion yuan, a corresponding growth rate of 81.95%/26.31%/21.39%, and a three-year CAGR of 40.8%; EPS of 0.65/0.82/0.99 yuan/share, respectively. The corresponding PE is 9/7/6 times, respectively. Given that the company has been deeply involved in the photovoltaic power plant field for many years and the high-quality growth in the module business, we gave the company 13 times PE in 24 years, with a target price of 10.7 yuan, and maintained a “buy” rating.
Risk warning: Power plant development falls short of expectations, subsidy disbursement falls short of expectations