1H22 forecasts profit growth of 187.5% year-on-year
The company announced the 1H22 performance forecast: the company expects 1H22 to return to the parent net profit of 6.9 billion yuan, + 187.5% compared with the same period last year; corresponding to 2Q22 profit of 3.87 billion yuan, month-on-month + 28%, in line with our and market expectations. Among them: 1) subsidiary loss affects profit: combined with the earnings announcement of the company's holding subsidiary Xiexin New Energy (0451.HK), due to the decline in the installed scale of the photovoltaic power station on hand and the loss on the exchange of US dollar debt, we estimate that the impact of the subsidiary Xiexin New Energy loss on the company's 1H22 homing net profit is about 300 million yuan. Excluding this part of the impact, we estimate the company's 2Q22 homing net profit at around 4 billion yuan. 2) the performance of the silicon link remains stable: we estimate that the net profit of the silicon link is about 300 million yuan, which is flat compared with the previous month; 3) the silicon material profitability is strong, and the advantage of granular silicon gross profit margin is obvious: we estimate that the silicon material link profit is about 3.7 billion yuan, combined with estimated 2Q22 silicon material equity shipments of about 30,000 tons, corresponding to a comprehensive profit per kilogram of about 125yuan / kg. According to the company announcement, the gross profit margin of Xuzhou granular silicon products continues to be higher than Xuzhou bulk silicon about 15ppt, granular silicon gross profit margin advantage is obvious.
Pay attention to the main points
Silicon supply shrank more than expected, and the industry business cycle is expected to continue. Due to a fire accident in an unlisted photovoltaic silicon plant in June, at least 30,000 tons of capacity was affected. We expect production capacity to fall by 5% month-on-month in July, while the weekly transaction price of the silicon industry calculated by the Silicon Industry Association jumped 5% at the end of June. After entering July, individual maintenance enterprises increased their production reduction in July, and three new enterprises planned to overhaul in the third quarter. at the same time, the increase in the price of downstream silicon wafers has increased the acceptance of silicon prices, and we expect silicon materials to maintain an upward trend in the short term.
Cooperation with major customers to land, upstream and downstream coordinated development. On April 9, 2022, the company signed a "Cooperation Framework Agreement" with TCL Technology (000100.SZ) and TCL Central (002129.SZ). The cooperation agreement includes: 1) a total investment of 9 billion yuan to build 100000 tons of granular silicon and silicon-based materials comprehensive utilization of production and downstream application R & D projects; 2) a total investment of 3 billion yuan to build about 10,000 tons of electronic grade polysilicon project. TCL Technology (or its subsidiaries) and Xiexin Technology (or its subsidiaries) plan to set up two joint ventures to implement the above projects. We believe that the cooperation between major customers and the company to invest in granular silicon projects shows the improvement of recognition and acceptance of granular silicon downstream.
Profit forecast and valuation
Considering the shortage of silicon material this year and the higher-than-expected price increase of silicon material, we raised our profit forecast for 2022 by 15.3% to 14.9 billion yuan. Taking into account the easing of supply after the release of silicon production capacity next year, silicon material prices may fall, we maintain the profit forecast of 11 billion yuan in 2023, and the current stock price corresponds to the price-to-earnings ratio of 2022x23 5.9x/8.0x. Raise the target price by 19.5% to 4.78 yuan to maintain the outperform industry rating, with the target price corresponding to the price-to-earnings ratio of 2022 7x/10x 23, with 26.8% upside space.
Risk
The demand of photovoltaic terminal is lower than expected, and the supply bottleneck of other photovoltaic raw and auxiliary materials is higher than expected.