2024H1 achieved net profit of 1.79 billion yuan to mother, +41% YoY. 2024H1 achieved operating income of 11.67 billion yuan, a year-on-year increase of 5%; net profit to mother was 1.79 billion yuan, an increase of 41% year-on-year. By business, 2024H1 photovoltaic glass achieved operating income of 10.12 billion yuan, a year-on-year increase of 4%; a gross profit margin of 22%, an increase of 6 pcts; PV power plant operation achieved operating income of 1.41 billion yuan, an increase of 3%; and a gross profit margin of 66%, a year-on-year decrease of 5 pcts.

Profitability of photovoltaic glass has improved, and production capacity expansion is progressing steadily. 2024H1's photovoltaic glass achieved revenue of 10.12 billion yuan, an increase of 4% year on year; gross profit margin was 22%, up 6 pcts year on year. At the end of 2023, the company's photovoltaic glass melting capacity was 0.0258 million tons, and 2024H1 added 3,200 tons of production capacity. By the end of 2024H1, the company's photovoltaic glass melting capacity reached 0.029 million tons per day. According to an estimate of 80% of 2.0mm glass shipments in the industry, we estimate that 2024H1's PV glass sales were 0.61 billion square meters, an increase of 11% over the previous year; the comprehensive price without tax was 16.5 yuan, and the gross profit of a single flat sheet was 3.6 yuan, an increase of 0.9 yuan over the previous year.

Profits improved year-on-year due to falling procurement prices of soda ash and natural gas, but component competition intensified, module prices continued to decline, photovoltaic glass prices declined, and profit margins were squeezed. According to an estimate of 80% of 2.0mm glass shipments in the industry, the unit price of photovoltaic glass fell by 2 yuan to 15.5 yuan (July) from a high of 17.5 yuan (April) during the year. We estimate that the gross profit of leading companies in July was about 2.9-3.0 yuan. Currently, profits in the photovoltaic glass sector are low, investment entry and exit thresholds are high, industry capacity supervision is being strengthened, and mid-tail enterprises are facing losses. It is expected that the concentration of the industry will increase in the future. 2024H2 is expected to add 3,200 tons of photovoltaic glass production line per day. The daily melting capacity of the company's photovoltaic glass is expected to reach 0.0322 million tons by the end of 2024.

The profitability of the power generation business has declined, and power plant construction has slowed. 2024H1's photovoltaic power plant operation achieved revenue of 1.41 billion yuan, a year-on-year increase of 3%; gross profit margin was 66%, a year-on-year decrease of 5 pcts. 2024H1's weighted average feed-in price was about 0.57 yuan/kWh, down 0.02 yuan/kWh from the previous year. Affected by power restrictions and market-based transactions, the profitability of the company's power generation business declined. At the end of 2023, the company's equity installed capacity was 4.11 GW, and the holding installed capacity was 5.94 GW; 2024H1 added 0.3 GW of holding installed capacity, and by the end of June 2024, the holding installed capacity reached 6.24 GW (the company directly holds 2.35 GW and indirectly holds 3.90 GW through Xinyi Energy, of which 5.84 GW is a centralized project), and the speed of power plant construction has slowed down. We expect that in 2024-2026, the company will add 0.3 GW, 0.6 GW, and 0.6 GW of PV Holdings, respectively. By the end of 2024-2026, the installed capacity of PV Holdings will reach 6.2 GW, 6.8 GW, and 7.3 GW.

Risk warning: the risk of photovoltaic glass production and sales falling short of expectations; the risk of increased competition in the industry; the risk that the company's cost reduction falls short of expectations.

Investment advice: Considering that competition in the photovoltaic module sector intensifies the decline in profits, glass companies' cash flow is under pressure. Based on prudential principles, we expect the company's net profit to be 3.63/3.55/4.59 billion yuan in 2024-2026 (original forecast 4.38/5.12/6 billion yuan), a year-on-year growth rate of -4%/-2%/+29% (original forecast 15%/17%/17%), diluted EPS is 0.41/0.40/0.52 yuan, corresponding to 2024- The 2026 dynamic PE was 8/8/6 times, maintaining the “better than the market” rating.