Brief performance review

On August 30, the company released its 2024 mid-year report. In the first half of the year, revenue was 37.4 billion yuan, -9% YoY; net profit to mother was 0.87 billion yuan, or -118% YoY. Among them, Q2 achieved revenue of 21.4 billion yuan, +5% year-on-year, +34% month-on-month, and realized net profit to mother of -0.39 billion yuan, -118% year-on-year, and month-on-month loss reduction.

Component shipments continue to grow, and product price reductions are putting pressure on profits. In the first half of the year, the company shipped more than 38 GW of battery modules (including 1 GW for personal use), an increase of 59 over the previous year; it is estimated that Q2 shipments exceeded 21 GW, an increase of 37% over the previous year. Competition in the PV industry chain intensified in the first half of the year. Prices in the industrial chain fell to a low level in the second quarter, profits in the main industry chain were under pressure, and the company's gross sales margin fell 2.0pct to 3.05% month-on-month. In the first half of the year, the company accrued asset impairment and credit impairment of 0.434/0.086 billion yuan, mainly due to inventory impairment and bad accounts receivable losses.

TopCon's leading technology, overseas production capacity and channel layout is expected to support share growth and profit recovery. The company adheres to technological research and development innovation. It is estimated that by the end of 2024, the production capacity of modules will exceed 100 GW, and the production capacity of silicon wafers and batteries will reach 80% of the module production capacity, including 57 GW of N-type batteries. The company's N-type battery production capacity reached production rapidly in the first half of the year. Product yield and battery conversion efficiency were greatly improved, and production costs dropped markedly. Currently, the conversion efficiency of N-type Beixiu batteries mass-produced by the company has reached 26.5%. As TopCon's share of shipments increases, the company's profitability is expected to be restored. The company has a leading overseas layout, with a sales and service network covering 165 countries and regions around the world, accounting for about 54% of overseas module shipments and 61.5% of overseas revenue in the first half of the year. In addition to the vertically integrated production base in Southeast Asia, the company built a PV module base in the US. As overseas production capacity is released one after another, the company is expected to offset the phased market troughs in individual countries or regions during the module price reduction cycle and achieve market share growth and profit recovery.

Operating cash flow has improved, and cash on hand has increased dramatically to cope with the industry's cold winter. The company's operating cash flow for the second quarter was 1.684 billion yuan, which was positive from month to month. The company's monetary fund balance rose to 24.9 billion yuan at the end of the second quarter, up 66% from the end of the first quarter. Against the backdrop of increased competition in the industry, it is expected that the company will be provided with sufficient capital to overcome the cycle.

According to our latest industry chain price forecast, the company's net profit forecast for 2024-2026 was lowered to -6.2 (previous value 27.9), 23.7 (-39%), and 34.4 (-28%) billion yuan. The company's current market value corresponds to PB of less than 1 times, maintaining a “buy” rating.

Risk warning

The international trade environment has deteriorated, progress in new technology has fallen short of expectations, and the RMB exchange rate has fluctuated.