Matters:

The company releases its 2023 annual report. In 2023, the operating income was 16.329 billion yuan, up -47.22 YoY, the net profit of the parent company was 5.763 billion yuan, up -69.86 YoY, the net profit of the non-parent company was 5.776 billion yuan, up -69.84 YoY, and the comprehensive gross margin was 40.35, up -34.48pct YoY. 2023Q4 realized operating income of 3.451 billion yuan, yoy -44.90%, yoy -2.88%, net profit of 0.648 billion yuan, yoy -83.95%, yoy -6.00%, net profit of non-return to 0.934 billion yuan, yoy -76.88%, yoy -124.16%, comprehensive gross margin of 19.70%, yoy -58.44pct, yoy -4.76pct.

comments:

polysilicon shipments continue to grow, capacity expansion to consolidate the leading position. In 2023, the company's first phase of 100000 tons of polysilicon project in Inner Mongolia was completed on schedule and reached production smoothly. In 2023, the company's polysilicon production reached 197800 tons, up 47.84 percent year on year. Benefiting from the continued release of production capacity and good product recognition, the polysilicon business was booming in 2023. In 2023, the company's polysilicon sales reached 200000 tons, up 50.48 percent YoY, of which 2023Q4 sold 59900 tons, up-5% month-on-month. The company's polysilicon production capacity is expected to be further released in 2024. The 100000-ton polysilicon project in Inner Mongolia Phase II is expected to be put into production in the second quarter of 2024, when the company's net production capacity will reach 305000 tons, and the 2024 annual polysilicon output is expected to reach 28-300000 tons.

leading technical strength, N-type silicon material accounted for rapid increase. With the wide application of downstream N-type battery technology, the company is keenly aware of market changes and advance layout, in this round of product iteration N-type silicon products quickly released. In 2023, the company sold 53200 tons of N-type silicon, accounting for 26.61 percent of the sales. In December, the sales of N-type silicon materials accounted for 59.11 percent. The company's Inner Mongolia production line has 100 percent of the production capacity of N-type silicon, Xinjiang production line currently N-type material accounted for 60-70%, the future through technological transformation, N-type material production capacity level will be further improved.

Cost reduction and efficiency enhancement continue to advance, improve the industrial layout and enhance comprehensive competitiveness. Thanks to the continuous improvement of the company's polysilicon production process, and the digital transformation has greatly improved the company's production efficiency, the company's unit cost will continue to decline in 2023. 2023Q4 The unit cost of polysilicon fell to 46.25 yuan/kg and the cash cost fell to 40.68 yuan/kg. In terms of industrial chain layout, the company's upstream layout of industrial silicon projects, to ensure supply chain security at the same time, is expected to further help reduce this. The company continues to reduce costs and increase efficiency, with sufficient cash on hand, low-cost advantages and good financial position are expected to help the company through the cycle.

investment advice: the company continues to reduce cost efficiency, sufficient funds in hand, is expected to smoothly through this round of silicon industry cycle. Considering the rapid decline in silicon prices, we adjust our earnings forecast, the company's 2024-2026 home-to-home net profit is expected to be 30.20/35.43/4.039 billion yuan (previous value 35.76/46.39/-billion yuan), the current market value corresponding to PE is 19/16/14 times. Referring to comparable company valuations, the company is given 22x PE in 2024, with a target price of $30.98, maintaining a "recommended" rating.

Risk Warning: PV installed demand is less than expected, the company's capacity release is less than expected, product price competition intensified, raw material price fluctuations.