Core views

The company released a semi-annual performance forecast for 2024. It is estimated that the company's net profit loss for the first half of 2024 was 0.09-0.18 billion yuan, a year-on-year decrease of 109%-119%; net profit loss after deducting non-post-return net profit loss of 0.43-0.52 billion yuan, a year-on-year decrease of 146%-156%. The pressure on the company's performance is mainly due to ① the reduction in prices in the photovoltaic industry chain and the rise in silver prices, which have squeezed the profit center of the battery sector. ② Due to price cuts in the industrial chain, the company faces a certain amount of inventory depreciation pressure. Currently, the company is gradually speeding up the expansion of battery production capacity in Oman, which will contribute to the company's performance flexibility after production is put into operation.

occurrences

The company released the 2024 semi-annual results forecast

In the first half of 2024, the company lost 0.09-0.18 billion yuan in net profit, down 109%-119% year on year; net profit loss after deduction was 0.43-0.52 billion yuan, down 146%-156% year on year. Based on the median forecast value, in Q2, the company's net profit to mother was -0.155 billion yuan, -144% year over year; net profit after deduction was 0.305 billion yuan, or -189% year-on-year.

Brief review

Affected by the price reduction in the industrial chain and the increase in silver prices, the company's Q2 performance was under pressure. Judging from the median forecast, the company lost 0.155 billion yuan in net profit in the second quarter, down 144% year on year; net profit loss after deduction was 0.305 billion yuan, down 189% year on year. In the first half of the year, the company shipped 19.21 GW of battery products (of which 16.43 GW of N-type products accounted for 85.5%). In Q2, the company shipped 7.9 GW of N-type batteries and 1.2 GW of P-type batteries in a single quarter. The company's overall performance in the second quarter was under pressure, mainly because ① the battery profit center was under some pressure due to price cuts in the industrial chain and rising silver prices; ② the company's inventory faced a certain decline in value due to price cuts in the industrial chain.

The gradual layout of overseas markets is expected to contribute to the company's performance flexibility in the future. Since 2023, the company has continuously accelerated its overseas market layout. On the one hand, the company's share of overseas shipments has continued to increase. On the other hand, the company plans to start producing 10GW TopCon batteries in Oman, mainly to supply the US market. At a stage where the domestic component production capacity in the US is growing rapidly, the scarcity of overseas battery production capacity will gradually increase. The company's battery production capacity in Oman will gradually be put into operation starting in 2025, which is expected to contribute to the company's performance flexibility at that time.

Profit forecast: We expect the company's 2024-2026 net profit to be 0.21/0.65/1.01 billion yuan, and the 2025-2026 PE corresponding to July 12, 2024 will be 13.2/8.5 times. The intensification of industry competition in 2024 will lead to a decline in industrial chain prices, and the company's performance will be under pressure. It is expected that the industry's production capacity may gradually be cleared in 2025. As an industry-leading TopCon battery manufacturer, the company's profitability is expected to recover and maintain an “gain” rating.

Risk analysis

1. The risk that industry demand falls short of expectations. The company's business is mainly in photovoltaic cells. If the industry's growth rate falls short of expectations, it will put some pressure on the company's single-watt battery profit.

2. The risk that overseas production expansion projects fall short of expectations. The company's Oman battery project mainly supplies high-premium overseas markets. Subsequent commissioning will have a big impact on the company's profit in 25-26. If the project's commissioning progress falls short of expectations, it will also cause profit risks.

3. The risk that a further rise in silver prices will lead to an increase in non-silicon costs. Among the non-silicon costs of TopCon batteries, the cost of silver paste is relatively high. The sharp rise in silver prices since the second quarter has led to an increase in non-silicon costs. If silver prices rise further in the future, it will lead to a further increase in the company's costs.