In December 2023, the company's Xuancheng Phase I 9GW TopCon production line was put into operation as scheduled and began climbing and commissioning. The company is one of the few three-party battery suppliers that have achieved large-scale N-type battery production capacity. At present, the company's production line has been successfully commissioned, and production is expected to gradually reach production in the second quarter. The company's production line is equipped with new technologies such as SE and LECO, and has many intent/potential cooperative component customers, which is expected to achieve batch shipments and contribute to performance this year. The company's raw equipment business has benefited from this round of technical changes in N-type batteries, and abundant on-hand orders have supported it to maintain high growth.
TopCon's cell business will gradually contribute. In 2023, the company revealed that it plans to build a 24GW TopCon battery project in stages. In December of last year, Xuancheng's first 9GW TopCon battery project was officially put into operation. It is one of the few tripartite battery suppliers that have implemented large-scale production lines, and the company is expected to form a large supply in 2024. The company's production line is equipped with new technologies such as SE and laser-induced sintering. The technology and product parameters are compared with advanced peers during the commissioning period, and it is expected to form strong competitiveness in the future. In addition, the company's own supply of environmental protection supporting equipment has a certain cost advantage, which may be reflected in the level of profit in the future.
N-type cells vary greatly, and the supply of high-efficiency TopCon is relatively tight. N-type TopCon products are still undergoing rapid iterative progress. The requirements for technology and process are relatively high, and there are large differences between companies in terms of product efficiency and cost. Currently, there are still a few companies that can stably supply high-efficiency batteries. The supply and demand situation is relatively tight. According to industry feedback, N-type battery manufacturers have slightly raised their prices before the holiday season.
The company's photovoltaic environmental protection equipment has benefited from this round of N-type cell technology changes. N-type batteries are expected to become the mainstream battery route this year and next year. Most companies with financial and technical reserves are actively expanding to cope with this round of technological change. The company is a leading supplier of environmental protection equipment for photovoltaic manufacturing exhaust gas, wastewater, pure water treatment, etc., and has benefited from this round of technological changes. Previously, the company had predicted a deduction of non-net profit of 2 to 265 million yuan in 2023, an increase of 123.9 percent to 196.7 percent over the previous year. Considering the impact of equity incentives and investment in battery R&D, the actual equipment business profit margin is higher. As of 2023Q3, the company's contract debt had increased to 760 million yuan (47 million for the same period in 2022), and orders were sufficient to support the company's performance growth. Furthermore, on February 5, the company disclosed that it had won the bid for 3 industrial park construction projects in Chengdu and Chongqing, and the subsequent equipment business growth is more certain.
The carbon sequestration business is expected to form a new growth point in the future. The company's carbon sequestration program uses materials such as steel slag to capture CO2, then mix it with materials such as ore powder and fly ash to prepare ultra-fine and highly active composite ore powder, which is used downstream in cement, concrete, etc., to achieve a balance between carbon reduction goals and solid waste treatment. It is currently a rare carbon recovery model that does not rely on subsidies and can be profitable, and there may be a lot of room for promotion in the future.
Investment advice: Consider price adjustments in the industrial chain, forecast the company's net profit of $210 to 650 million in 2023 and 2024, and maintain a “highly recommended” rating.
Risk warning: Downstream production expansion falls short of expectations, new business falls short of expectations, and raw material prices fluctuate.