Matters:

The company released the third quarter report for 2024. In 2024Q1-3, the company achieved revenue of 63.147 billion yuan, a year-on-year increase of -22.16%; net profit attributable to the parent company -847 million yuan, a year-on-year increase of -116.67%; The gross profit margin was 12.46%, a year-on-year increase of -4.38 pct, and the net profit margin attributable to the parent company was -1.34%, a year-on-year increase of -7.60 pct. Among them, in 2024Q3, the company achieved revenue of 20.179 billion yuan, a year-on-year increase of -36.41% and a month-on-month increase of -18.34%; net profit attributable to the parent company -1.373 billion yuan, a year-on-year increase of -189.31%, a month-on-month loss; The gross profit margin was 9.48%, -7.21 pct year-on-year and -3.64 pct month-on-month, and the net profit margin attributable to the parent company was -6.80%, -11.65 pct year-on-year and -6.84 pct month-on-month.

Comments:

The industry's module earnings were under pressure in the third quarter, and the company's operating cash flow continued to flow in. Module prices continued to decline sequentially in the third quarter, as we expect the company's module business to lose money in the third quarter and turn negative sequentially due to lower selling prices and lower shipments in the U.S. market. In terms of shipments, the company shipped nearly 16.5 GW of modules in the third quarter, sold about 1 GW of distributed systems, and maintained high profitability in its distributed business, and shipped about 2 GW of brackets. Energy storage shipments are close to 850MWh. In terms of the company's cash flow, the operating cash flow in the third quarter continued to maintain a net inflow, and the operating cash inflow in Q3 was about 4 billion yuan, which was basically the same as the previous quarter. Cash flow continued to flow in, demonstrating solid operational capabilities.

The PV Association has called for anti-involution competition, and PV modules are expected to get rid of the price melee. Recently, the photovoltaic industry association has taken the lead, calling on manufacturing enterprises to participate in market competition in accordance with laws and regulations, and not to sell and bid below cost. At present, the bidding price has stabilized and rebounded, and in the future, driven by policy, the industry is expected to get rid of the situation of price melee.

The implementation of overseas production capacity accelerated shipments in the U.S. market, and technology research and development continued to increase. The company plans to ship 70-75GW of modules in 2024, with an energy storage target of 5GWh. With the implementation of the company's production capacity in Indonesia and the United States, it is expected that the company's shipments in the U.S. market will continue to grow, contributing to the company's performance. In terms of technology, the company has been deeply engaged in the N-type advanced technology route and continues to iteratively upgrade TOPCon technology. In October, the company's self-developed high-efficiency n-type i-TOPCon cell achieved a maximum efficiency of 25.9%, creating a new world record for the efficiency of large-area industrialized N-type monocrystalline silicon TOPCon cells.

Investment suggestion: The company continues to develop globalization and deploy overseas production capacity, and module shipments are expected to continue to grow. Considering the competitive factors in the industry, we adjust the profit forecast, and it is expected that the company's net profit attributable to the parent company in 2024-2026 will be -2.76/31.78/4.605 billion yuan respectively (the previous value is 11.20/29.76/4.121 billion yuan), and the corresponding PE of the current market value will be -198/17/12 times respectively. Referring to the valuation of comparable companies, it gives 20x PE in 2025, corresponding to a target price of 29.16 yuan, and maintains a "recommended" rating.

Risk warning: downstream demand is less than expected, the international trade environment deteriorates, and competition intensifies.