Prices in the industrial chain fell, and Q2 profits were affected by the industry. In 24H1, the company achieved operating income of 37.357 billion yuan, a year-on-year decrease of 8.54%, and net profit to mother of 0.874 billion yuan. 24Q2 achieved operating income of 21.385 billion yuan, a year-on-year increase of 5.02%, and net profit to mother of 0.391 billion yuan. Since 2023, new production capacity in all links of the industrial chain has begun to be gradually released. Affected by the phased imbalance between supply and demand, prices in the industrial chain have dropped sharply, and prices in many links have fallen below the cost line, causing losses in the entire industry chain. As industry fluctuations intensify and product prices continue to fall, the company's profitability has been affected to a certain extent.

Shipments continued to increase, and battery costs continued to improve. In the first half of '24, the company further stepped up its market development efforts. Shipments of battery modules exceeded 38 GW (including 1 GW for personal use), of which overseas module shipments accounted for about 54%, and battery module shipments increased significantly over the same period last year. With the smooth commissioning and production of the company's new battery project, battery conversion efficiency has been greatly improved, production costs have dropped markedly, and large-size batteries have reached the leading level in the industry in terms of conversion efficiency and production costs. The mass production conversion efficiency of n-type Bycium+ (Bycium+) batteries has reached 26.5%. The process will continue to be improved to further reduce battery production costs and improve battery cost performance.

Overseas shipments account for a relatively high proportion, and the share of N-type orders is gradually increasing. In the first half of '24, the company's component shipments in China reached 45% to 50%, Europe accounted for 20% to 25%, America accounted for 15% to 20%, and other regions including the Asia-Pacific region accounted for about 15%. N-type components accounted for about 60% of orders in the first half of the year. According to the current order situation, the proportion of N-type components in Q3 and Q4 will further increase, and overall market demand is still somewhat guaranteed.

Adequate cash reserves to guarantee the transition through the cycle. According to the “Investor Relations Activity Record Form September 2, 2024”, in the first half of '24, the company made reserves and added 25 billion yuan in loans to cope with future uncertainty. More than 60% of these were long-term loans for 3-5 years. The risk assessments of banks and financial institutions recognized the company, and communication was smooth. The company's bank credit line is sufficient. More than 72 billion yuan is available, and about 34 billion yuan has actually been used. In addition to loans, there are other methods, such as bank acceptance notes, letters of credit, etc.

Profit forecasting and investment advice. In 2024-2026, we expect the company's net profit to be -1.34/2.645/3.641 billion yuan, respectively, and the corresponding EPS of -0.40, 0.80, and 1.10 yuan respectively. Referring to the average PE value of comparable companies, we gave the company a 25-year 14-16 times PE, with a corresponding reasonable value range of 11.19-12.79 yuan, giving it a “superior to the market” rating.

Risk warning: downstream demand falls short of expectations; increased competition; new technology substitution; fluctuating product prices.