Main points of investment

SiC silicon carbide: 6 inch substrate has been successfully developed; silicon carbide slicer has a market share of more than 90%, and edge chamfering machine has been put into trial, according to the company's official Wechat official account.

1) SiC substrate: 6-inch silicon carbide substrate was successfully trial-produced. The silicon carbide substrate project in the company's R & D center laboratory lasted 7 months, and the two furnaces of crystals were successfully grown in October, continuing the "on-machine speed". The 6-inch silicon carbide crystal has an effective thickness of 20 mm, and the microtubules and dislocations of the machined substrate have reached the leading level in China.

2) SiC equipment: the company's semiconductor silicon carbide slicer and edge chamfering machine have opened up a precedent of "domestic replacement of imported silicon carbide equipment", which has covered Tiankeheda, Tongguang Technology, Lou Xiao Technology, Tony Electronics and other high-quality customers. Among them, the order volume of silicon carbide slicer has been close to 150, with a domestic market share of more than 90%. Silicon carbide edge chamfering machine has been successfully developed and has been sent to customers for trial.

3) SiC industry: the demand potential of new energy vehicles + photovoltaic is huge, the technology gap at home and abroad is gradually narrowing, and domestic substitution is expected. Company integrated layout of SiC silicon carbide materials + equipment, towards photovoltaic + silicon carbide platform materials / equipment leader.

Construction of Xuzhou 25GW slice + 24GW N-type battery project accelerated, moving towards N-type integrated photovoltaic leader according to the company's official Wechat account: the company's Hongyuan new material and new energy industry integration project (Xuzhou 25GW slices + 24GW N-type battery) broke ground on August 16th, after a short period of 80 days, the first equipment was stationed in trial production on November 6, breaking the new speed of project construction in Xuzhou Economic Development area. The company has signed an order of 3.2 billion N-type silicon material to move towards N-type integrated photovoltaic leader.

One of the most integrated photovoltaic leaders: "industrial silicon + silicon material + silicon wafer / wafer equipment + N-type battery chip + power station"

Relying on the advantages of photovoltaic equipment business and cutting into the photovoltaic industry chain, the company is committed to becoming one of the photovoltaic enterprises with the most complete product line, the highest degree of integration, the latest production capacity, the lowest cost and the strongest core competitiveness.

1) Industrial silicon + silicon material (self-built): the proposed project of 150000 tons of high-purity industrial silicon + 100000 tons of high-purity polysilicon, of which 80,000 tons of high-purity industrial silicon + 50,000 tons of polysilicon is under construction. The first phase of 50,000 tons of polysilicon will be put into production in April 2023 (according to the company news).

At the same time, the government will equip the company with 3.8GW photovoltaic + 1.7GW wind power plant targets, which are expected to guarantee the company's advantage in low electricity prices.

2) Industrial silicon + granular silicon (27% stake): it has invested an additional 1.02 billion yuan to jointly invest 100000 tons of granular silicon + 150000 tons of high-purity nano-silicon project, with a stake of 27%. After putting into production, the company will obtain no less than 70% of granular silicon (corresponding to 70,000 tons) to meet the silicon demand of 25GW wafers and strengthen the protection of silicon materials and the competitiveness of silicon wafers.

3) Silicon wafer pulling + slicing: at present, the production capacity has reached 35GW pulling + 25GW slicing. It is planned to build 40GW silicon wafer production capacity + Xuzhou 25GW chip production capacity in Baotou, and the production capacity will move towards 75GW crystal pulling + 50GW slices.

4) N-type battery: the production capacity of 24GW N-type high-efficiency battery is to be built. The second phase of 14GW high-efficiency battery is under construction, and the third phase is planned for 10GW. The choice of battery technology includes N-type batteries such as TOPCon and HJT. We have signed an order for 3.2 billion N-type silicon material.

5) New energy power station: the company plans 5.5GW new energy power station, and the project is currently under planning and construction.

Investment advice: high growth and low valuation; one of the photovoltaic leaders with the highest degree of integration, the lowest cost and the most competitive photovoltaic leader expects the company to return home net profit of RMB 100 million in 2022-2024, an increase of 115%, 85% and 23% compared with the same period last year; consider 2.5 billion convertible bonds, corresponding to PE of 16-9-7. The company's PE valuation is significantly lower than the industry average. Maintain a "buy" rating.

Risk hints: substantial production expansion leads to the deterioration of the competition pattern, silicon price increases affect terminal demand, technology iteration risk.