Investment Highlights:

Company Overview: 1) Stable operation, the world's first-tier module manufacturers have crossed multiple cycles. Founded in 2007, the company has been ranked among the world's first-tier module suppliers for many years. Through steady operation, the company has successfully passed through the four-wheel industry cycle, and the current company is slowing down into the corner and is expected to cross steadily again. 2) Financial analysis: The performance of the industry is stable at the low point, and diversified businesses contribute to profitability. From Q1 to Q3 2024, the company achieved revenue of 63.147 billion yuan, a year-on-year increase of -22.16%, and a net profit attributable to the parent company of -847 million yuan. In 2024 H1, the company/photovoltaic system/smart energy revenue accounted for 69.95%/25.24%/3.56%, and the gross profit margin was 11.13%/18.43%/23.22%.

Industry: 1) Supply and demand: short-term contradictions appear, and industry self-discipline is expected to promote production capacity clearance. The long-term growth of the demand side has not changed, and the short-term growth rate has slowed down. The substantial expansion of production on the supply side has caused the price of the industrial chain to be lower than the cost, and the policy and industry self-discipline are expected to accelerate the repair of the contradiction between supply and demand. 2) Industrial chain: The module end has a long slope and thick snow, and the profit distribution is expected to be tilted. At present, the capacity expansion of each link fully meets the market demand, the pattern of the module link is stable, and strong barriers such as channels, brands, and global operations are expected to occupy an advantage.

Component business: Intensive cultivation for more than 20 years to build a moat. 1) Sales and operation: The company has a long-term layout of channel operation, forming a global structure, significant brand value, and building a long-term supply chain dominant position in the supply chain. 2) Production and sales: The company has ranked among the top three in the world in terms of shipments for 12 consecutive years, with module shipments of 50.50GW in 2024Q1-Q3 and 70-75GW expected for the whole year. The integrated production capacity ranks in the forefront of the industry, and the appropriate layout is accurate to go to sea. It is expected that by the end of 2024, the company's photovoltaic wafer/cell/module production capacity will reach 55GW/105GW/120GW respectively, and the Indonesian and US bases are expected to be put into operation by the end of the year.

Diversified business: Collaborative development contributes to performance. 1) Bracket: technology + brand channel + intelligent platform, business ushered in a rising period.

In 2018, the company acquired the stent business overseas, forming a dual advantage in international industrial layout and technology. In 2023, the company's tracking stent shipments will rank 6th in the world and 2nd in China, accounting for about 6% of global shipments. 2) Distributed system: The leader of distributed system, the operation and maintenance business has accumulated steadily. Founded in 2016, the subsidiary, Tianhe Fortune Home, ranks among the top two in the world, with a market share of about 20% in the domestic residential market. The O&M business contributed new increments, and as of the end of September, the company's distributed power station O&M scale was 15.2GW.

3) Energy storage: Photovoltaic and storage synergy, moving towards a period of rapid development. The company's energy storage business began to be deployed in 2015 and has deep accumulation in terms of production capacity, products and channels. In 2024Q1-Q3, energy storage shipments will be 2.55GWh, and 5GWh is expected to be shipped throughout the year.

Investment suggestions: We predict that the company's net profit attributable to the parent company in 2024-2026 will be -6.23/23.35/4.025 billion yuan, EPS will be -0.29/1.07/1.85 yuan/share, and the corresponding PE of the current stock price in 2024-2026 will be -67.49 times/18.01 times/10.45 times, and the corresponding PB will be 1.37 times/1.28 times/1.11 times. As a photovoltaic module, the company benefits from the advantages of brand, channel, international layout and other advantages. At the same time, the company's business diversification has accumulated steadily, and the bracket, energy storage and other sectors have contributed to the performance, and it is expected that the leading advantages will continue to highlight in the process of clearing the industry's production capacity. First coverage, with a "buy" rating.

Risk warning: the risk that the growth rate of photovoltaic installed capacity is not as fast as expected; global policy risks; The risk of price fluctuations in the industrial chain.