Description of the event
Artes released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 51.31 billion yuan, up 8% year on year; net profit from mother was 2.03 billion yuan, up 35% year on year; 2023Q4 achieved revenue of 12.191 billion yuan, down 14% year on month, down 6% month on month; net profit to mother of 63 million yuan, down 93% year on month; 2024Q1 achieved revenue of 9.597 billion yuan, down 19% year on month; net profit from mother of 579 million yuan, down year on year 37%, up 815% month-on-month; deducting 638 million non-net profit, down 23% year-on-year, and 132% month-on-month.
Incident comments
In 2023, the company shipped 30.7 GW of components, an increase of 45% year over year. By market, the top three of the company's annual revenue were America, China, and Europe. Among them, European shipments increased by 24% year on year, and the US increased by 28%. The company's net profit per watt remained at a good level throughout the year. Among them, Q4 is expected to be close to break-even, following industry trends. The company shipped 1.9 GWh of energy storage throughout the year, in line with expectations, and confirmed revenue of 1.1 GWh. The remaining revenue will be confirmed in 2024. The gross margin exceeds 17%, an increase of 5.1 pct over the previous year, mainly benefiting from lower raw material prices and increased scale effects.
2024Q1, the company shipped about 6.3 GW of components (North America accounts for more than 20%), and is expected to decline month-on-month. Mainly, the company took into account the current market price level and achieved a balance between quantity and profit. The optimization of the product structure and market structure supports that the company's Q1 profit level is better than expected. The net profit per watt is expected to be at the leading level in the industry. The company's Q1 component profit is expected to come mainly from the US market. At the same time, the company's Q1 energy storage revenue was 1 GWh, a slight increase from month to month. The gross margin was better than expected, which is also the reason for the decline in raw material prices and scale effects. The 2024Q1 fee rate was 9.6%. Due to the reduction in the revenue scale, the fee rate increased month-on-month. The company experienced asset impairment losses of 240 million yuan in 2024Q1, mainly due to the elimination of old battery production capacity or falling inventory prices. Other income of 90 million yuan, or mainly government subsidies.
Looking ahead to the future, in the component business, the company is actively responding to the current complex situation and consolidating market and product advantages. The annual shipment is expected to be 42-47GW, of which the US share and N share are expected to increase. Currently, TopCon battery efficiency has reached 26%, yield is over 98%, and the production capacity of rod/silicon wafer/battery/module is expected to reach 50.4/50/55.7/61 GW respectively by the end of the year. The company's 5GW module production capacity in the US is expected to be fully produced within the year, and profitability is excellent after receiving IRA subsidies. The energy storage business, with orders currently signed with contracts of 2.6 billion US dollars, is expected to explode in 2024. The system production capacity is expected to reach 20 GWh by the end of the year, and the annual shipment is expected to be 6.0-6.5 GWh. The gross margin is expected to continue its excellent performance, making it the company's second growth curve.
We expect the company to achieve profits of 4 billion and 5.9 billion in 2024-2025, corresponding to PE of 11 and 8 times. Maintain a “buy” rating.
Risk warning
1. Deterioration of the competitive landscape;
2. PV installation falls short of expectations.