Core views

The company released its 2024 mid-year report. The company's net profit to mother during the reporting period was -6.0.7 billion yuan, of which net profit for the Q2 single quarter was -1.001 billion yuan. During the reporting period, due to pressure on silicon prices and profits, the company promptly lowered the operating rate, and cash cost losses were manageable. At the end of Q2, the company fully calculated impairment preparations for raw materials and commodities, and there was limited room for calculation in the second half of the year. Currently, the silicon industry has come to an end, and prices are expected to be in the L-shaped bottom within the next 1-2 years. The company's 1,000-ton semiconductor silicon production capacity continues to climb the slope, creating a second growth curve. The company has sufficient cash, prudent new capacity expansion decisions, and strong certainty throughout the cycle.

occurrences

The company released its 2024 mid-year report. The revenue for the reporting period was 4.584 billion yuan, down 50.84% year on year, and net profit to mother was -0.67 billion yuan, down 115.14% year on year; the company's revenue for the 2024Q2 single quarter was 1.602 billion yuan, down 64.14% year on year, down 46.27% month on month, and net profit to mother was -1.001 billion yuan, down 166.05% year on year and 402.70% month on month.

Brief review

Silicon prices and profits are under pressure. The company has reduced the operating rate in a timely manner, and cash cost losses are manageable. As a silicon leader, Q2 is also facing a situation of losing cash costs. Referring to PVInfoLink data, the company's silicon operating rate was lowered to 61% in July, corresponding to a monthly output of about 0.014 million tons. Q3 expects silicon production to be around 0.043-0.046 million tons, and the annual output will also drop to 0.21-0.22 million tons. If silicon prices stabilize in the second half of the year, the company is expected to lose only 0.25-0.3 billion yuan in cash.

At the end of Q2, impairment preparations were fully calculated for raw materials and commodities, and there is limited room for calculation in the second half of the year. As of the end of Q2, the company's silicon inventory was about 0.034 million tons, and industrial silicon inventory was about 0.03 million tons (book value 0.45 billion yuan/0.015 million yuan/ton). In total, the inventory depreciation loss was 7.0.8 billion yuan, with an average depreciation loss of about 0.012 million yuan per ton. Considering that the average price of Q2 silicon without tax decreased by about 0.013 million/ton compared to Q1. The company's current impairment calculation is very sufficient, and it currently has Inventory can cover most orders in the second half of the year, so the impairment that needs to be calculated in the second half of the year is limited.

The silicon industry has come to an end, and prices are expected to be in the L-shaped bottom within the next 1-2 years.

With the operating rate of the silicon industry falling, the current inventory growth rate in the industry has begun to slow down. Combined with recent sales bottoming of silicon wafers, integrated components, and futures, silicon prices have rebounded slightly in the past month. It is expected that before terminal demand can cover the nominal production capacity of silicon, the price of silicon will fluctuate at the bottom of the L shape.

The 1,000-ton semiconductor silicon production capacity continues to climb and advance, creating a second growth curve. Through introduction and independent research and development, the company's semiconductor polysilicon process has been comprehensively optimized to achieve safe and stable long-term production of the device. The quality of the company's 1000 ton semiconductor polysilicon production line continued to climb during the reporting period. The quality requirements and unit price of semiconductor silicon materials are significantly higher than photovoltaic silicon materials, and the market space is broad.

The company has sufficient cash, prudent new capacity expansion decisions, and strong certainty throughout the cycle. As of the end of Q2, the total amount of the company's cash on hand plus accounts receivable was 6.89 billion yuan, down 11.9 billion yuan from the previous month. The main reason was that the company increased its term deposit of about 9.9 billion yuan within 1 instalment plus an increase in cash expenses to receive labor, distribute dividend profits, and pay interest payments. Currently, the company's balance ratio is only 11%, and the balance and liability situation is very safe.

Investment advice: The company's net profit for 2024-2026 is expected to be -1.667, 0.829, and 1.924 billion yuan, respectively, with year-on-year growth rates of -128.92%, 149.76%, and 132.0%, respectively. Earnings per share are -0.78, 0.39, and 0.9 yuan respectively. Net profit to mother for 2025-2026 corresponds to PE 48.89 and 21.07 times the closing market value on August 26, respectively.

Risk warning: 1. Rapid release of silicon production capacity. There was a lot of silicon production and new production capacity in 2024. If silicon production capacity is released quickly in a short period of time and is faster than demand growth, it may cause silicon prices to drop drastically, affecting the company's performance; 2. Demand for photovoltaic terminals falls short of expectations. Demand for components may fall short of expectations due to industrial chain prices, consumption situations, and weak demand; the production side may fall short of expectations due to large fluctuations in upstream raw material prices, electricity restrictions, etc., which in turn affects the company's related business shipments and profitability; 3. Raw material prices have risen sharply. The main raw material of silicon is industrial silicon. If the supply of industrial silicon is insufficient and the price rises due to factors such as electricity restrictions, the company's silicon costs may rise, affecting profitability.