Introduction to this report:
The company announced its 2023 annual report and 2024 quarterly report. The results of the annual report fell at the center of forecasting, and the quarterly report fell short of market expectations.
Key points of investment:
Maintain an “Overweight” rating. The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 3.129 billion yuan and net profit of 654 million yuan. The announcement results were basically at the center of the previous forecast. 24Q1 achieved revenue of 340 million yuan and net profit to mother of 122 million yuan, lower than market expectations. In the context of profit compression in the main industry chain in 24, we lowered the 2024-25 EPS to 1.47, 2.05 (-5.83, -7.20) yuan, and added the 2026 EPS forecast of 2.87 yuan. Referring to PV auxiliary materials, the company's valuation is comparable. Combined with the company's upstream targeting high-quality raw materials and the downstream backbone, the leading edge is remarkable. PE 32X was given 24 years, the target price was lowered to 47.04 yuan, and the “increase” rating was maintained.
Downstream demand is weak, and crucible shipments are under pressure. The company achieved sales of 107,700 crucibles in '23, a year-on-year decrease of 11%. According to the company's announcement, 23Q1/Q2 sold about 36,300 units. It is expected that Q3 and Q4 will decline quarterly, while 24Q1 will decline further month-on-month. It is expected to be mainly affected by weak production schedules, profit pressure in the main industry chain, and continued high prices of 23Q4 and 24Q1 crucibles and quartz sand. As downstream production schedules pick up, combined with the introduction of sharp price cuts in downstream quartz sand and crucibles, downstream procurement intentions may increase, but with the increase in the size and lifespan of crucibles, shipments are not expected to increase significantly throughout the year.
Profits in the main industry chain have been compressed, and crucible pricing and profit pressure have been highlighted. The average sales price of the company's crucibles in '23 was 19,500 yuan/piece. It is expected that the 24Q1 price will remain high, and the price will gradually drop in late March. SMM data shows that the 36-inch crucible had dropped to 22,000/piece in late April, a drop of nearly 50% compared to the 23Q4 price drop. The company's 23Q3-24Q1 comprehensive gross margin continued to decline, and profit from auxiliary materials also declined significantly against the backdrop of overall profit compression in the photovoltaic industry chain. There is no trend recovery in demand at this stage, and it is expected that the company's Q2 pricing and profit will remain under pressure.
During the period of product structure change, the impairment was fully accrued. The company fully accrued asset impairment in 23Q4 and 24Q1. It is estimated that due mainly to the run-in period of P to N, some crucible products require process adjustments. At the same time, the stability and consistency of products converted to large-size crucibles in some old production lines still need to be improved, and depreciation is calculated based on the principle of prudence.
Risk warning: raw material supply and price fluctuations, demand growth falls short of expectations