The A-share IPO is about to be held, and the issuance is expected to be completed by the end of the year:

The listing committee of the Shanghai Stock Exchange announced on September 12 that the initial IPO for the main board of the Shanghai Stock Exchange is scheduled to be held on September 19. The company's current A-share IPO has issued no more than 300 million shares and raised no more than 8.8 billion yuan in capital to build the 200,000 ton polysilicon project in Zhundong. The first phase of 100,000 tons was completed at the end of June 2023, and production will be completed before the end of the year. If the A-share IPO is successful, it is expected that the issuance will be completed before the end of 2023. It is expected that the successful issuance of A-shares will help broaden financing channels and reduce financial costs. In addition to meeting production expansion needs, the fundraising group will also create more and more stable cash flow for future dividend distribution. Therefore, the successful issuance of A-shares is a key catalyst for increasing the company's overall valuation.

Polysilicon prices have been rising steadily in the short term, which is beneficial for the company's Q3 profit to rise month-on-month:

According to the latest data from the Silicon Industry Branch, the mainstream price of monocrystalline compound feed was 82.3 yuan/kg, the mainstream price of monocrystalline dense material was 80.4 yuan/kg; the price of N-type material was 92.3 yuan/kg, and the overall price of silicon material remained flat month-on-month. Recently, polysilicon supply and demand have been tight, and inventories have continued to be low. Looking at the supply side, the actual output of new silicon production capacity is limited, and overall supply is still tight; from the demand side, silicon wafer production schedules have increased dramatically recently, and procurement demand for silicon materials continues to be strong. In a situation where supply and demand are tight in the short term, it is expected that Q3 prices will continue to rise steadily, which is conducive to a month-on-month recovery in the company's Q3 profit.

The price difference of N-P silicon materials has increased, and the company's N-type silicon materials have shown advantages:

Currently, the price difference of N-P silicon material has reached 1 yuan/kg. As the penetration rate of N-type silicon wafers increases (about 30% in 2023 and about 70% in 2024), market demand for N-type silicon materials will expand, and the N-P price gap is expected to increase further. 2023H1's Ganquanbao base accounts for about 50% of N-type silicon materials, and Inner Mongolia's N-type silicon accounts for about 30%. As a leading polycrystalline silicon enterprise, the company's production facilities can produce more N-type materials with price advantages according to downstream order demand.

Maintain the buy rating and raise the target price to HK$20:

We raised the company's target price to HK$20, which is equivalent to 5 times and 4.7 times PE in 2023 and 2024. The target price has room to increase by 24% from the current price, maintaining the buying rating.