Incident: The company achieved operating income of 38.529 billion yuan in 2024 H1, a year-on-year decrease of 40.41%; realized net profit to mother of 5.243 billion yuan, a year-on-year decrease of 157.13%. 2024Q2 achieved operating income of 20.855 billion yuan, a year-on-year decrease of 42.60%; realized net profit to mother of 2.899 billion yuan, a year-on-year decrease of 152.21%.

Due to the continued sharp drop in industrial chain prices and inventory impairment, the first half of the year's performance lost sharply. Faced with sharp fluctuations in the period of deep industrial adjustment, the company actively adjusted the pace of production and sales. In the first half of 2024, it achieved 44.44 GW of silicon wafers (21.96 GW of external sales); 2.66 GW of external battery sales; and 31.34 GW of modules. Among them, sales in the Asia-Pacific region increased sharply by more than 140% year on year. PV products achieved operating income of 36.708 billion yuan, with a gross margin of only 6.46%. Affected by the continuous sharp decline in industrial chain prices and inventory impairment, the company experienced a large loss in 2024H1 performance. In the first half of the year, the company prepared 5.784 billion yuan for asset impairment and 4.375 billion yuan for resale inventory price reduction. Together, the two affected a reduction in total profit of 1.41 billion yuan and a reduction in net profit of 1.381 billion yuan. 2024H1's return on silicon investment fell sharply, with a loss of 0.035 billion yuan and 2023H1 of 2.245 billion yuan, which also had a significant impact on profits. The net cash flow from 2024H1 operating activities was -6.413 billion yuan, of which -1.524 billion yuan was 2024Q2, and the net cash outflow narrowed. By the end of 2024H1, the company had cash capital of 54.5 billion yuan, and the balance ratio was only 59.16%. During the downturn in the industry, the company's finances are still healthy and resilient to risks.

BC components were shipped smoothly, and production capacity bucked the trend to create a differentiated competitive advantage. In the first half of the year, the company shipped about 10GW of BC components, and marketing is progressing smoothly. In the first half of 2024, while the company industrialized innovative Tyro silicon wafers and HPBC 2.0 technology achievements, it continued to make breakthroughs in the development of efficiency and cost reduction technologies such as efficient packaging, 0BB technology, and key materials. Based on the new packaging scheme, the power of HPBC 2.0 components has been greatly increased by more than 10W, and the reliability has been enhanced comprehensively. At present, the company's high-quality N-type Terry silicon wafers have been introduced into mass production, and improvements in quality and efficiency have been verified on the battery side; with the construction and capacity transformation projects of BC second-generation projects such as the first phase of 12.5GW batteries and 12GW batteries in Tongchuan in Xixian New Area, HPBC 2.0 products will be launched on a large scale by the end of 2024. It is expected that the company's BC production capacity will reach 70 GW by the end of 2025 (of which HPBC2.0 production capacity is about 50 GW), and all domestic battery bases plan to migrate to BC products by the end of 2026.

US component customs clearance resumed smoothly, and the joint venture plant was successfully put into operation. In 2023, the company's products were unable to clear customs smoothly in the US market, and delivery dates could not be promised to customers, leading to loss of customers and preparation for large inventory price drops for components that have been stranded in Hong Kong for a long time. The company has enhanced global capabilities around a supply chain traceability management system, green and sustainable procurement, and localized operation. It has achieved smooth customs clearance of shipments in North America. The US 5GW component factory has officially been put into operation, forming strong support for business development in the North American region.

Profit forecast. Due to falling prices of components and silicon wafers and asset impairment, 2024H1 experienced a large loss in performance. The company's Terry silicon wafers have been mass-produced in 2024Q2, and HPBC second-generation products will be launched in 2024H2, creating a differentiated competitive advantage. The company's net profit from 2024 to 2026 is estimated to be -5.047, 3.364, and 5.227 billion yuan, respectively, and the corresponding PE is -21, 31, and 20 times, respectively.

Risk warning: Risk of US policy sanctions, risk of falling short of expectations when new technology is put into production, risk of exchange rate and overseas operations, and the risk that changes in investment income will have a volatile impact on the company's performance.