Report highlights

2024H1's revenue was 10.147 billion yuan, +21% year over year, net profit to mother 2.096 billion yuan, -4.97% year over year, after deducting non-net profit of 2.094 billion yuan, +1% year over year. The company's contract debt was 8.367 billion yuan, and the products issued in inventory were 9.4 billion yuan. There was a slight decline over the previous year, but the overall level remained high in history. By business, the equipment and service business 24H1 revenue was 7.37 billion yuan, +20.6% year over year; the material business 24H1 revenue was 2.37 billion yuan, +25.7% year over year. The company's overall revenue growth rate slowed year-on-year. It is estimated that it was mainly affected by increased competition and capacity clearance due to short-term mismatches between supply and demand in the downstream photovoltaic industry since 23Q4, and the pace of signing new orders by the company has slowed down.

Judging from the profit performance, 2024H1's gross profit margin was 37%, -5.65pct year on year, and the net profit margin was 23.54%, and -6.46pct year on year. Among them, the gross profit margin of equipment and services was 37.43%, -2.7 pct year on year; the gross profit margin of the materials business was 40.15%, -14.51 pct year on year. Nearly 90% of the company's materials business comes from quartz crucibles (according to 2023). The gross margin of the materials business declined sharply. It is speculated that due to the decline in domestic demand for quartz sand and the impact of imported quartz sand release, quartz crucible prices have returned to rationality.

Judging from the details affecting profit, the decline in the company's profit and net interest rate was mainly affected by an increase in three fees (+56%/+40%/+1.9% year-on-year sales, management/R&D expenses, respectively), changes in fair value of invested companies (Shichuang Energy, Xinlian integration, etc.), and preparation for depreciation of inventory over a long period of time.

Investment advice and profit forecasting

We estimate the company's 24-25 net profit to mother of 5.712 billion yuan and 6.869 billion yuan. Currently, the market's consensus forecast for the company's 24-year PE is 5.8X, and the valuation has reached a historically low level. As fifth-generation monocrystalline furnaces and intelligent integrated equipment are gradually recognized by customers, the launch and release of new semiconductor equipment products, and the rapid increase in the scale of business in the materials field, the company is expected to achieve cycle crossing through diversification of equipment+materials and multi-field layout. We give an investment rating of “increase in holdings.”

Risk warning

Downside risks: Downstream demand falls short of expectations, the competitive landscape of the industry deteriorates, new materials are slowly developing upward risks: demand for downstream equipment exceeds expectations, silicon carbide cost reduction exceeds expectations, and demand for core consumables exceeds expectations.