On August 24, the company disclosed its 2024 mid-year report. The first half of the year achieved revenue of 16.2 billion yuan, or -54% year-on-year, achieving net profit attributable to mother of 3.064 billion yuan, net profit after deducting non-return to mother of 3.489 billion yuan, turning a year-on-year loss. Among them, Q2 achieved revenue of 6.3 billion yuan, -64% year-on-year, and -37% month-on-month, realized net profit to mother of 2.184 billion yuan, net profit after deducting non-return to mother of 2.45 billion yuan, turning a year-on-year loss.

Shipments of silicon wafers continued to grow, and losses under pressure on prices increased. In the first half of the year, the company shipped 62 GW of silicon wafers, +18.3% over the same period last year. The overall market share of silicon wafers was 23.5%, ranking first in the industry. Among them, N-type export market share was 42%, an increase of 6 PCT over 2023. The imbalance between supply and demand in the industry intensified in the first half of the year. The company's cost reduction was not as fast as the market price drop. The profitability of the silicon wafer business declined significantly, the superimposed battery module business segment was relatively uncompetitive, and the gross sales margin fell to -15.99% in Q2.

Asset impairment and losses of participating companies affect the company's performance. In the first half of the year, the company calculated a loss of 1.371 billion yuan, of which the inventory price drop was prepared for 1.366 billion yuan. As the bottom of the industrial chain stabilizes, the impact on profits is expected to weaken in the future. In the first half of the year, the company participated in the rapid decline in PV product prices in Europe and the US, where the main market for Maxeon's products is located, the PV subsidy policy was adjusted, and a high interest rate environment was maintained. Maxeon's business transformation was slow, and both performance and stock prices fell sharply during the reporting period, leading to an increase in the company's losses.

Technological processes remain industry-leading. The company continued to maintain its lead in silicon wafer technology and processes. According to the interim report, by the end of the reporting period, the company's N-type products achieved a single monthly output of about 12.3%, leading the industry's second-best by 1.15 pieces per kilogram, leading the industry at a total cost of about 0.033 yuan/W against the backdrop of high unit depreciation.

Actively promote overseas layout to enhance competitiveness. The company prudently but firmly promotes its globalization strategy. On July 16, it was announced that it signed a “Shareholder Agreement” with RELC and Vision Industries, a subsidiary of the Saudi Arabian Public Investment Fund (PIF), to jointly invest 2.08 billion US dollars to build a 20 GW photovoltaic crystal chip project. The company holds 40% of the shares, which is expected to become the largest overseas crystal chip factory, effectively radiating the Middle East, North Africa and European markets and strengthening the company's global competitiveness. Furthermore, the company plans to control Maxeon through a package of restructuring transactions such as convertible bonds and fixed increases, and enhance the competitive advantage of the global layout (especially in North America) through mutual promotion and collaborative empowerment of production and channels around the world.

Profit Forecasts, Valuations, and Ratings

According to our forecast on silicon wafer prices and competitive patterns, net profit for 2024-2026 was lowered to -47 (previous 28), 15 (-59%), and 26 (-39%) billion yuan. Considering that the silicon wafer performance is under pressure, the company still maintains its manufacturing advantage, while actively promoting overseas production capacity layout to strengthen global competitiveness, and downgraded to an “gain” rating.

Risk warning

Industry demand falls short of expectations, industry competition intensifies, and international trade risks.