Description of the event

The company released its 2024 semi-annual report. 2024H1 achieved revenue of 10.147 billion yuan, +20.71% year over year; realized net profit of 2.096 billion yuan, -4.97% year over year; and realized net profit after deduction of 2.094 billion yuan, +1.02% year over year. Based on this calculation, 2024Q2 achieved revenue of 5.638 billion yuan, +17.29% year over year; realized net profit of 1.027 billion yuan, or -22.19% year on year; realized net profit without deduction of 0.992 billion yuan, or -17.20% year on year.

Incident comments

A number of factors weighed on second-quarter results. Beginning in 2023Q4, the short-term mismatch between supply and demand in the photovoltaic industry has intensified competition in the industry, compounded the adverse effects of international trade, and reduced product prices and profits in all parts of the industrial chain. The slowdown in acceptance of the company's photovoltaic equipment and the drop in crucible prices led to a drop in revenue growth in the second quarter to a low level in recent quarters. At the same time, the drop in crucible prices also caused a certain drag on overall 24Q2 gross margin. The company's 24Q2 gross margin fell to 31.78%, with year-on-month declines of more than 10 pcts.

In addition, due to a year-on-year decrease in superposition subsidies, an increase in asset impairment and credit impairment accruals during the industry adjustment period, and changes in net investment income, the company's 24Q2 net interest rate fell by more than 10 pct to 18.57% over the same period last year.

The share of the materials business has further increased. By business, 24H1 equipment and service revenue was 7.37 billion yuan, up 20.64% year on year, gross profit margin was 37.43%, down 2.70 pct year on year; sapphire materials business revenue was 2.37 billion yuan, up 25.74% year on year, and gross profit margin was 40.15%, down -14.51 pct year on year. The 24H1 materials business accounted for 23.3% of revenue, achieving a further increase.

Continue to accelerate the platform-based layout to help get through the cycle. 1) In the field of photovoltaic equipment, we collaborate with downstream strategic customers to continue to innovate in the fields of product technology and technology, automation and intelligence, and advanced manufacturing models to greatly reduce customers' production and operation costs. On the battery side, new product processes for photovoltaic cell equipment such as tubular PECVD, LPCVD, diffusion, annealing, single-chamber multi-boat ALD, and boat dry cleaning were rapidly promoted. The related equipment was tested in small-scale mass production by mainstream manufacturers in the industry, and successfully achieved breakthroughs in battery equipment exports. 2) Semiconductor equipment: The silicon wafer side successfully developed a 12-inch dry-in, dry-out edge polisher and a 12-inch double-sided thinning machine, and entered the customer verification stage one after another. In the field of power semiconductors, we have successfully developed 8-inch single-chip and double-chip silicon carbide epitaxial growth equipment, which can increase unit production capacity and reduce the production cost of silicon carbide epitaxial sheets; successfully developed optical measuring equipment for silicon carbide substrate and epitaxial sheet quantity testing, and localization of silicon carbide quantity testing equipment, etc. Under the recovery of the industry and the acceleration of domestic production of semiconductor equipment, the company's orders for large silicon wafer equipment and silicon carbide epitaxial equipment have grown rapidly. 3) New materials business: rapidly advancing the production capacity of 8-inch silicon carbide substrates, while actively expanding domestic and foreign customers, rapidly increasing production capacity and shipments. The recovery in demand for sapphire materials contributed to the rapid year-on-year growth of the business, which successfully achieved the growth of 1,000kg oversized sapphire crystals. Build a fully automated production platform for quartz crucibles, improve the consistency of high-quality products, greatly improve the service life of crucibles, and further increase the company's market share of quartz crucible products. Actively promote the construction of the second phase of the diamond wire expansion project, rapidly increase the production capacity of tungsten wire, continue to increase the production capacity and shipment volume of diamond wire, and actively promote the development and industrialization process of finer tungsten wire.

Maintain a “buy” rating. Net profit due to mother is expected to be 4.714 billion and 5.182 billion in 2024-2025, corresponding to PE 6x and 6x, respectively, maintaining a “buy” rating.

Risk warning

1. The risk that downstream production expansion falls short of expectations;

2. The risk that the company's new product development progress falls short of expectations.