(Report producer/analyst: Guotai Junan Securities, Pang Junwen, Shi Yan, Zhu Pan)
1. Differentiated competition is expected to help companies successfully transform
1.1. Investment Essentials
Different views from the market: the market believes that the domestic photovoltaic market is already relatively fully competitive, forming a leading market pattern, Saifutian as a new player in the photovoltaic track, technology accumulation is relatively limited, in the context of overcapacity transformation road or difficult, future profits There is greater uncertainty. We believe that the company's differentiated competition has the potential to contribute to a successful transformation.
1) In terms of technical layout, the company chooses the follower strategy, lays out the production capacity of TOPCon batteries with relatively mature technology paths, reduces the risk of technology path selection and gives full play to the advantages of latecomers.
2) Due to the higher profitability of overseas photovoltaic cells and modules, overseas sales capabilities and channels will become scarce resources in the future, the company reached a strategic cooperation with the central enterprise SUMEC, and SUMEC participated in the Mingguang TOPCon factory to achieve benefit sharing, and relied on SUMEC overseas module sales channels to deepen overseas layout, so as to achieve differentiated competition.
1.2. Profit Projections
Key assumptions:
Photovoltaic cell business: The company is a new energy enterprise integrating the R&D, production and sales of PERC cells and N-type TOPCon cells, relying on years of manufacturing experience and refined management, coupled with the continuous growth of downstream demand, the company's cell business is expected to achieve substantial growth.
(1) PERC battery: At the beginning of 23, the Xuzhou PERC production line quickly formed 2GW production capacity, and the current production line is in full production. In the first half of 23, cell shipments were released rapidly, and the operating income of PERC business in Q1 and Q2 was 204 million yuan and 368 million yuan, respectively, and the sales volume was 0.2 and 0.49GW, respectively.
It is expected that Q3 and Q4 will achieve sales of 0.4/0.4GW, and considering that the company has no new PERC capacity plans in the future and the current PERC orders have reached 1.4 billion, it is expected that the PERC production line will achieve full production and sales in 24-25 years.
Therefore, we expect the company's PERC cell sales to be 1.49/2/2GW from 2023 to 2025, and according to the current industry price situation and future cost change expectations, we expect the price per watt to be 0.74/0.74/0.74 yuan/W, and the net profit per watt is 0.05/0.04/0.03 yuan/W.
Considering the comprehensive volume and price, we expect the company's PERC cell business to achieve operating income of 11.63/14.80/1.480 billion yuan, with a growth rate of 27.21% and 0% in 24 years and 25 years, respectively, and as PERC cells are gradually replaced by TOPCon cells in the future, the gross profit margin will show a downward trend, and the company's gross profit margin in 23-25 years is expected to be 15.72%/15.31%/13.85% respectively.
(2) TOPCon battery:
Production capacity: The company's new base is located in Mingguang County, Chuzhou, Anhui, and the first phase plans to build a 5GW N-type cell production line, which will be opened in late September 23, and is expected to take 1 month to complete production, and the first phase of 5GW will be fully produced by the end of 23. The second phase of 5GW production capacity is expected to be put into operation in Q2 24, and the construction of public auxiliary facilities has been completed, and the equipment will enter the site after the first phase reaches production. The third phase of the company's planning to add 10GW of production line, next door to the existing delivery room, is currently in the land planning stage, and construction will start in 24 years. Coupled with the overseas capacity layout, it is expected that the company will release 20-25GW of TOPCon capacity in 24-25 years.
Sales volume: the company's future new production capacity are N-type cell production capacity, considering that the photovoltaic cell industry is upgrading and iterating from P-type to N-type at this stage, the market due to the actual expansion of N-type cell technology progress is lower than expected, so that N-type cells are in short supply, superimposed on the company's overseas channel continuous layout, it is expected that the company's future production capacity will have full release space, and it is expected that the company's TOPCon cell sales in 2023-2025 will be 0.63/6.0/16.0GW.
Product unit price: At the same time, according to the current industry price situation and future cost change expectations, we expect the company's TOPCon cell price to be 0.7/0.7/0.7 yuan/W from 2023 to 2025, and the net profit per watt will be 0.08/0.07/0.06 yuan/W.
Considering the comprehensive volume and price, we expect the company's TOPCon cell business to achieve operating income of 4.38/42/11.2 billion yuan, with a growth rate of 860% and 166.67% in 24 years and 25 years, respectively, and with the release of industry production capacity, the gross profit margin will decline with the increase of TOPCon penetration, and the company's gross profit margin in 23-25 years is expected to be 20.96%/19.42%/18.81% respectively.
Traditional business: The company's traditional business includes wire rope and other products, architectural design and textile business. Considering that the wire rope market for elevators in mainland China has generally stabilized in recent years, we believe that the company's traditional business has limited room for growth. It is expected that the revenue of the company's traditional business in 2023-2025 will be about 7.00/7.00/700 million yuan, corresponding to a growth rate of -19.3%/0%/0%, and the gross profit margin will be 13.50%/13.50%/13.50% respectively.
Combined with key assumptions, we expect the company's total operating income from 2023 to 2025 to reach 23.01/63.80/13.380 billion yuan, corresponding to a growth rate of 189.06%/177.28%/109.72%, comprehensive gross margin of 16.04%/17.82%/17.98%, net profit attributable to the parent of 0.78/3.16/1.104 billion yuan, and EPS of 0.27/1.10/3.85 yuan.
1.3. Valuation and Summary
Saifutian takes into account the field of wire rope and photovoltaic cells, and we select 4 comparable companies: Junda Co., Ltd., Aixu Co., Ltd., JinkoSolar Co., Ltd. and Kangli Elevator. Among them, Junda Co., Ltd. is the leader in the N-type battery industry, Aixu Co., Ltd. focuses on high-efficiency solar cells, and JinkoSolar lays out photovoltaic building integration and energy storage, which is comparable to the company's photovoltaic cell business. Kangli Elevator covers the R & D and manufacturing of elevator machines and core components, which is comparable to the company's wire rope business.
As the mainland wire rope market has remained stable in recent years, the industry prosperity has declined, the profit space of steel wire rope enterprises is limited, and the PS valuation method is applicable, while the company began to cut into the photovoltaic track in 23 years, P-type, TOPCon double-line development, with good growth, apply PE valuation method. Therefore, two valuation methods, PE and PS, are employed.
PE valuation method: Referring to the average valuation level of comparable companies in 2024 is 12.29 times PE, considering that the company occupies a large market share in the field of elevator wire rope, and is expected to rely on traditional business to achieve industrial connectivity of "urban construction + green energy" in the future, while the company actively expands overseas production capacity + photovoltaic power plants, the future growth space is large, give a certain valuation premium, give the company 15 times PE in 2024, corresponding to a reasonable valuation of 16.5 yuan.
PS valuation method: Referring to the average valuation level of comparable companies in 2024 is 0.88 times PS, considering that the company's future TOPCon production capacity continues to explode, it is expected to seize market share, give a certain valuation premium, and give the company 0.9 times PS in 2024, corresponding to a reasonable valuation of 20.01 yuan. Combining the two valuation methods of PE and PS, based on the principle of prudence, the company is given 15 times PE (or 0.74 times PS), corresponding to a target price of 16.5 yuan.
2. The wire rope industry started and entered the photovoltaic industry to achieve a breakthrough in performance
2.1. The wire rope industry started and strategically transformed photovoltaic cells
The company is a long-established wire rope manufacturer. Jiangsu Saifutian Steel Cable Co., Ltd. was established in June 2005, formerly known as Wuxi Steel Wire Rope Factory, founded in 1958, affiliated to Wuxi Metallurgical Industry Bureau old state-owned enterprises.
In June 2005, Wuxi Saifutian and German PFEIFER jointly established Jiangsu Saifutian as a joint venture.
In 2016, the company was listed on the Shanghai Stock Exchange.
In 2019, the company's controlling shareholder was changed to Suzhou Wuzhong Rongtai Holdings Co., Ltd.
In December 2022, the company participated in the establishment of Suzhou Saifutian New Energy Technology Co., Ltd. and held it, and the joint venture was positioned as a research and development, production, sales of P-type and new TOPCon photovoltaic cells, related core components, equipment and downstream application services, and the company officially entered the photovoltaic industry.
In June 2023, Saifu Tianxin Energy acquired 100% of the shares of Nanjing Medalen Solar Technology Co., Ltd., indirectly held 51% of the shares of Anhui Medalun Photovoltaic Technology Co., Ltd., and promoted the construction of a 5GW N-type TOPCon battery production base.
At this point, the company's main business layout has been initially completed, and it has begun to focus on photovoltaic cell business, becoming a new energy enterprise focusing on the research and development, production and sales of Perc cells and N-type TOPCon cells.
The company's traditional main business is the research and development, production and sales of special wire ropes and rigging. Special wire rope products specifically include elevator wire rope and lifting wire rope, rigging products mainly include wire rope rigging and synthetic fiber hoisting belt rigging, etc., widely used in elevators, engineering machinery, port terminals, coal mines, marine engineering, ships, ocean salvage, logistics warehousing and other industries.
Figure 2: The company's traditional main products include special wire ropes and rigging
Acquired Doujin Architectural Design and expanded its architectural design business. In April 2020, the company acquired a 100% stake in Tonjin Architectural Design (Suzhou) Co., Ltd. to further expand the company's business. Doujin Architectural Design is now an architectural design unit approved by the Ministry of Construction of the People's Republic of China for Grade A design qualification in the construction industry (construction engineering).
It can undertake architectural engineering design, architectural decoration engineering design, building curtain wall engineering design, light steel structure engineering design, building intelligent system design, lighting engineering design and fire protection facility engineering design, and can engage in construction project general contracting business, project management and corresponding technical and management services.
Established a joint venture to enter photovoltaic cells.
1) In December 2022, Suzhou Saifutian Investment Management Co., Ltd., a wholly-owned subsidiary of the Company, and Suzhou Hexin New Energy Co., Ltd. jointly invested and established Suzhou Saifutian New Energy Technology Co., Ltd., and Suzhou Saifutian subscribed to contribute RMB 102 million, accounting for 51% of the registered capital. The joint venture is positioned to develop, produce and sell P-type and new TOPCon photovoltaic cells, related core components, equipment and downstream application services. The joint venture officially received orders and scheduled production in January 2023. As of May 2023, the cumulative amount of Perc orders of Saifutian New Energy has exceeded 1.4 billion yuan, and subsequent orders are expected to continue to increase, with an estimated annual shipment of 2GW.
2) In June 2023, Saifutian New Energy acquired 100% of the shares of Nanjing Medalun Solar Technology Co., Ltd., indirectly held 51% of the shares of Anhui Medalun Photovoltaic Technology Co., Ltd., and promoted the construction of a 5GW N-type TOPCon battery production base, which is expected to complete the construction of the project plant, supporting facilities and equipment installation and commissioning in September, and is scheduled to be put into operation in the fourth quarter of 2023.
2.2. Actively promote equity incentives to help business transformation
The controlling shareholder of the company is Suzhou Wuzhong Rongtai Holdings Co., Ltd., and the shareholding subsidiaries involve architectural design, new energy, rigging, new materials and other industries. Suzhou Wuzhong Rongtai Holdings Co., Ltd. holds 28.91% of the company's shares and is the company's controlling shareholder.
The ultimate controller of the company is Jiangsu Wuzhong Economic and Technological Development Group Co., Ltd., Suzhou Dingxin Investment Co., Ltd., Suzhou Wuzhong Financial Holding Group Co., Ltd., Suzhou Yuewang Group Co., Ltd., Suzhou Binhu Group Co., Ltd. 5 companies jointly controlled.
The company holds 100% of the equity of Tongren Architectural Design (Suzhou) Co., Ltd., Jianfeng Rigging Co., Ltd., Jiangsu Saifutian New Material Technology Co., Ltd., Suzhou Saifutian Investment Management Co., Ltd., Jiangsu Saifutian Steel Rope Co., Ltd., Jiangsu Saifutian New Energy Research Co., Ltd., etc., indirectly holds 51% of the equity of Suzhou Saifutian New Energy Technology Co., Ltd. and 51% of the equity of Nanjing Medalun Solar Technology Co., Ltd.
Released an employee stock ownership plan and conducted strict assessments to help strategic transformation.
The company disclosed the employee stock ownership plan and its draft in March 2023, and the source of shares of the employee stock ownership plan is the shares repurchased by the company's special securities account, the total number of shares does not exceed 3.7896 million shares, accounting for 1.32% of the company's current total share capital, and the incentive targets mainly include the core personnel of the new energy company and the core employees of the business segment of the fandesign company. According to the company-level performance indicators, it is expected that the company's revenue in 23 and 24 years is expected to achieve substantial growth.
2.3. Achieve a breakthrough in strategic transformation and drive revenue growth due to shipments
The transformation of photovoltaic has achieved initial results, and shipments have driven revenue growth. In 2022, the company achieved revenue of 796 million yuan, a year-on-year decrease of 13.06%, mainly due to the downturn of the general environment and the impact of the industry cycle.
The company's product orders decreased and some orders were delayed, and the wire rope, rigging business and architectural design business were affected to varying degrees. At the end of 22, the company began to actively transform photovoltaic new energy.
In the first half of 2023, the company's cell business made breakthroughs, with a significant increase in shipments, achieving operating income of 917 million yuan, a year-on-year increase of 143.58%; Achieved a net profit attributable to the parent of 31 million yuan, successfully turning losses into profits.
The first battle was successful, 23H1 company's cell business revenue accounted for 62.43%, from 2018 to 2022, special wire rope and rigging is the company's main revenue business, accounting for 80% of the total, at the end of 22, the company began to actively transform photovoltaic new energy, in the first half of 2023, the company's cell business revenue reached 572 million yuan, contributing 62.43% of the company's operating income.
The decline in the company's 23H1 gross profit margin was mainly caused by the decline in the gross profit margin of special wire rope, and the company's 2023H1 comprehensive gross profit margin and net profit margin were 10.58%/4.87%, respectively, -6.24/+1.13pct year-on-year. In terms of business, the gross profit margin of architectural design and EPC business was as high as 50%, and the gross profit margin of the main business special wire rope decreased, with a gross profit margin of 14.94%.
With the expansion of revenue scale, the company's fee control effect is remarkable.
During 2023H1, the expense ratio was 6.22%, a year-on-year decrease of 7.07pct, and the management/R&D/sales/finance expense ratio was 2.94/1.78/0.79/0.71%, respectively, a year-on-year decrease of 3.88/1.51/1.14/0.54pct.
3. The demand for TOPCon batteries is strong, and the company, as a new star in the N-type era, will continue to enjoy industry dividends
3.1. Cell industry: With the arrival of the N-type era, TOPCon will become mainstream
3.1.1. The demand for N-type batteries continues to be strong, with a premium of 0.05 yuan per piece higher than Perc
Cells are the core link of the photovoltaic industry chain. The photovoltaic cell business engaged in by the company is located in the middle of the photovoltaic industry chain, mainly through the upstream procurement of silicon wafers for processing into cells, so as to sell to photovoltaic module companies.
Photovoltaic cells are the core components of photovoltaic power generation, and their technical routes and process levels directly affect the photoelectric conversion efficiency and service life of the components. At present, the main technical routes of photovoltaic cells can be divided into P-type polycrystalline, P-type monocrystalline and N-type monocrystalline.
Figure 11: Cells are the core link of the PV industry chain
The cost reduction effect of the mature product line of N-type TOPCon battery is remarkable.
According to CPIA estimates, the investment cost of new TOPCon battery line equipment will be about 190,000 yuan/MW in 2022, slightly higher than Perc batteries, a rapid decline from 220,000 yuan/MW in 2021, and is expected to be lower than Perc batteries in 2030.
At the same time, TOPCon cells are ahead of Perc cells in silicon wafer thinning, monocrystalline square rod film output, and per capita output rate of battery lines, and the non-silicon cost of N-type batteries is slightly higher than that of P-type Perc cells by 0.03-0.06 yuan/W.
The average efficiency of TOPCon cells is significantly improved, which is close to that of heterojunction cells.
According to CPIA, the average conversion efficiency of TOPCon cells in 2022 reached 24.5%, an increase of 0.5% over 2021, higher than all P-type cells, close to the HJT cell efficiency of 24.6%, and TOPCon cell efficiency is not inferior to other battery technologies.
N-type TOPCon batteries are in high demand.
After market verification in the past few years, downstream operators' recognition of N-type TOPCon products has increased significantly, and the proportion of N-type tenders in some domestic bidding projects in 2023 has increased from the top 10% to more than 30%, and the proportion of N-type tenders in the past three months has reached 34.5%.
According to CPIA estimates, the N-type TOPCon cell market will account for about 8.3% in 2022, and will exceed 20% in 2023 and continue to increase, and the TOPCon battery dividend period will continue.
The expansion of the N-type TOPCon battery production line is less than expected, and the tight supply and demand makes TOPCon batteries expected to continue to maintain a higher premium than Perc.
At present, in addition to JinkoSolar's large-scale supply of TOPCon modules through an integrated approach, the only three-party suppliers that can supply N-type TOPCon batteries are individual companies such as Junda Co., Ltd., and the supply is tight.
At present, the price of N-type batteries is about 0.81 yuan/W, the price of P-type batteries is about 0.76 yuan/W of P-type, and the premium of N-type TOPCon batteries reaches 0.05 yuan, maintaining a higher premium than Perc.
3.1.2. Volume: TOPCon battery segment is expected to produce 121GW in 2023 and 352GW in 24 years TOPCon battery segment is expected to produce 121GW in 2023 and 352GW in 24 years.
The top 3 planned production capacity of TOPCon cells are Jinko, Tongwei and JA Solar. Among them, Jinko TOPCon plans 121GW, Tongwei TOPCon plans 98GW, and JA TOPCon plans 97GW. TOPCon has become the first choice for most mainstream component companies.
TOPCon will be the next generation of primary battery technology after Perc. Given that the efficiency of P-type Perc cells is close to its theoretical limit, although Perc products are still mainstream products, their market share is being replaced by explosive growth of N-type products.
In the context of the rapid growth of N-type technology production capacity, about 20GW of N-type high-efficiency products were shipped in 22 years, accounting for about 7%, with the rapid growth of N-type battery production capacity, the total market share of N-type high-efficiency products is expected to reach 25-30% in 2023, claiming that the production capacity of high-efficiency battery technology has exceeded 2000GW, of which more than 1700GW is TOPCon technology, and the rapid growth of TOPCon production capacity has made it clear that TOPCon will become the next generation of main battery technology after Perc.
With the rapid development of new battery technology, the head enterprises have accelerated their layout, and TOPCon has rapidly increased its volume.
At present, Perc battery technology has reached the efficiency bottleneck, and major leading enterprises are actively deploying new battery technologies, among which N-type technology represented by TOPCon has been rapidly expanded.
23H1TOPCon has completed construction of about 200GW of capacity, and more than 400GW of TOPCon capacity will still be landed in the second half of the year, given that the release of new capacity construction is lower than expected. This issue lowers the 2023 TOPCon shipment to around 110GW.
1) In terms of efficiency, although the official said that the efficiency of the multi-event enterprise is around 25.5%, the difference between the actual efficiency and the declared efficiency is about 1% from the wattage of each module, and after SE has basically become a standard process, the actual efficiency of the current TOPCon has reached about 24.5%.
2) In terms of yield, as manufacturers' production capacity climbs to stabilize, the yield of mainstream manufacturers has reached a level of about 97%.
According to the planning of various manufacturers, it is estimated that the landing capacity of HJT is expected to exceed 50GW by the end of 2023. As of 23H1, the HJT production capacity has reached about 23GW.
Due to different test standards, the actual HJT mass production efficiency is comparable to or even slightly higher than that of TOPCon. HJT production capacity is basically all equipped with bifacial microcrystalline process, and the efficiency is mostly around 25-25.5%.
As the unit consumption of HJT silver paste of major manufacturers in 23Q3 has decreased significantly, and silver-clad steel and 0BB technology have been pushed into mass production, the conversion of silver-clad copper and BB technology from 0 to 1 is expected to accelerate the landing of subsequent HJT production capacity.
3.2. The company entered the photovoltaic cell track, and the revenue increased significantly
3.2.1. The Company officially transformed its cell business, and the cumulative order amount has exceeded 1.4 billion yuan
At the end of 22, the company officially transformed its cell business, and is expected to hold 2GWPerc capacity and 5GWTOPCon capacity by the end of 2023.
1) Perc: In December 2022, Suzhou Saifutian Investment Management Co., Ltd., a wholly-owned subsidiary of the company, and Suzhou Hexin New Energy Co., Ltd. jointly invested and established Suzhou Saifutian New Energy Technology Co., Ltd., with the subsidiary holding 51% of the shares. Saifutian New Energy is mainly engaged in photovoltaic cell business, and officially received orders and scheduled production in January 2023. As of May 2023, the cumulative Perc order amount of Saifutian New Energy has exceeded 1.4 billion yuan, and subsequent orders are expected to continue to increase, and the annual shipment is expected to reach 2GW.
2) TOPCon: In June 2023, Saifutian New Energy indirectly acquired 51% of the shares of Anhui Medalun to promote the construction of a 5GW N-type TOPCon battery production base, which is expected to complete the construction of the project plant, supporting facilities and equipment installation and commissioning in September, and is scheduled to be put into operation in the fourth quarter of 2023.
We believe that the management team of Hexin has been deeply engaged in the field of photovoltaic cell manufacturing for nearly 20 years, with profound technology, market and resource accumulation, coupled with Saifutian's many years of manufacturing experience and the platform advantages and partner advantages of listed companies, Saifutian has great development potential after entering the photovoltaic track.
3.3. Team + customer + capacity advantages, which are expected to help the company successfully transform
3.3.1. Perc rapidly builds 2GW of capacity to fuel subsequent TOPCon expansion
The company officially received Perc orders in January 2023 and scheduled production, and 23H1 Company's Perc production capacity climbed, and the performance was gradually released. In 2023H1, the company achieved revenue of 917 million yuan, +143.58% year-on-year, of which Perc battery business achieved operating income of 368 million yuan, accounting for 62.61%, and the profit is expected to be 15 million yuan. With 2GW expected full-year shipments, we believe the company's profitability has improved and the new energy business attributes have been further highlighted.
Perc batteries were rapidly mass-produced, laying the foundation for the company's subsequent TOPCon expansion. As a newcomer to the photovoltaic cell industry, the 2GWPerc cell production line in H1 2023 is currently in good health.
In addition, based on 60 years of manufacturing experience, the company has gradually accumulated rich experience in lean production and cost management, which has laid a solid foundation for the company's subsequent large-scale mass production and refined management of TOPCon cells.
At present, the company's customers are mainly mainstream and well-known component companies in the industry. In the future, the company will serve more head customers and realize the coordinated development of the upstream and downstream of the industrial chain. The company's 23Q1 and Q2Perc cell operating income was 2.04/369 million yuan, respectively.
3.3.2. The team has obvious advantages and is ready for the long-term development of the company
The core team headed by Mr. Zhou Jinfeng generally has more than ten years of experience in the photovoltaic industry.
As the main body of listed companies to develop photovoltaic business, Suzhou Saifutian New Energy Technology Co., Ltd. is 51% owned by Suzhou Saifutian Investment Management Co., Ltd., a wholly-owned subsidiary of Saifutian and 49% of the shares held by Suzhou Hexin New Energy Co., Ltd.
Mr. Zhou Jinfeng serves as the general manager of Saifutian New Energy Technology Co., Ltd., and the core team led by him generally has more than ten years of experience in the photovoltaic industry.
Actively launch employee stock ownership plans and equity incentives to help transformation. In June 2023, the company plans to launch an employee stock ownership plan to no more than 59 people, including directors, supervisors, senior managers, middle managers and core technical (business) key personnel, corresponding to 3,789,600 shares, accounting for 1.32% of the company's total share capital.
Among them, Mr. Yi Hang, the general manager of Doujin Design, subscribed for 2.555 million shares, accounting for 13.19% of the total number of shares of the current shareholding plan; Mr. Zhou Jinfeng, General Manager of New Energy, subscribed 1,481,900 shares, accounting for 7.65% of the total number of shares of the current shareholding plan.
In addition, in order to meet the needs of the company's sustainable development and continuously attract and retain outstanding talents, the employee stock ownership plan intends to reserve 1,531,000 shares as reserved shares, corresponding to 299,600 shares of the company's shares, accounting for about 7.91% of the total shares of the stock ownership plan.
In addition, the controlling shareholder of the company has the attribute of local state-owned capital participation, and the controlling shareholder can bring the government's industrial resources.
3.3.3. Customer advantages: The company has sufficient orders in hand and continues to improve capacity utilization
The company currently has sufficient orders on hand. Up to now, the company's cumulative order amount has exceeded 1.4 billion yuan, and subsequent orders continue to increase, and the annual shipment is expected to reach 2GW. The company has an excellent team with rich experience in the photovoltaic industry, and has accumulated rich and high-quality customer resources in many years of operation.
At present, the company has formed a good cooperative relationship with GCL Integration and other representative enterprises in the photovoltaic industry, and has signed sales framework agreements with GCL Integration, Jinneng Cleaning, Huayao Optoelectronics, and Xinneng, with a cumulative order amount of more than 2.4 billion yuan.
In the future, with the successive delivery of the company's cell orders, the new energy business is expected to have a positive impact on the company's performance.
3.3.4. Capacity advantages: Together with SUMEC, TOPCon is expected to generate 5GW of capacity in 23Q4
The company acquired Nanjing Midaren and continued to expand its production capacity. In May 2023, the company's holding grandson Saifuren New Energy acquired 100% of the equity of Nanjing Medalun held by Jiangsu Darun, because Nanjing Meidalun holds 51% of the equity of Anhui Medalen Photovoltaic Technology Co., Ltd., so Suzhou Saifutian New Energy Technology Co., Ltd. indirectly holds 51% of the shares of Anhui Meidalen Photovoltaic Technology Co., Ltd.
After the completion of the acquisition, Anhui Medalun will be indirectly owned 51% by the company, Sumec will hold 39%, and Anhui State-owned Capital will hold 10%. The company has achieved strategic binding with SUMEC through equity cooperation.
Anhui Medalun has implemented a new N-type TOPCon solar cell production line with an annual output of 10GW in Mingguang City, with a total land area of about 273 mu. The first phase of 5GW is under construction, and the equipment will be gradually installed and commissioned in August, and is expected to be officially put into operation in the fourth quarter of this year.
Due to the higher profitability of overseas photovoltaic cells and modules, overseas sales capabilities and channels will become scarce resources in the future, the company reached a strategic cooperation with the central enterprise SUMEC, and SUMEC participated in the Mingguang TOPCon factory to achieve benefit sharing, and relied on SUMEC overseas module sales channels to deepen overseas layout, so as to achieve differentiated competition.
4. Deeply cultivate the field of special wire rope, the leader of the domestic elevator wire rope industry
4.1. The company's special wire rope business includes two application scenarios: elevator and lifting and reuse
The company is deeply engaged in the field of special wire rope, and the related main products are elevator wire rope (about 70%), lifting wire rope (about 17%) and rigging (about 11%).
4.2. Wire rope for elevators: The demand in the industry is growing steadily, and the leading position is solid
4.2.1. New elevator supporting + in-use elevator maintenance, industry demand is growing steadily
The wire rope industry for elevators has grown steadily. The demand for steel wire rope for elevators mainly comes from the new elevator supporting market and the elevator maintenance market in use.
The demand for new elevators with wire ropes for elevators is mainly determined by the market demand of the elevator industry.
Elevator wire rope is an important accessory for new elevator installation, with the acceleration of the mainland's urbanization process, infrastructure construction investment continues to increase, the mainland elevator industry shows a rapid development trend, elevator ownership, annual output, annual growth are the world's first.
According to data from the National Bureau of Statistics, as of July 2023, domestic production of elevators, escalators and lifts was 876,000 units, a year-on-year increase of 9.91%.
Figure 31: Domestic production of elevators, escalators and lifts is growing steadily
As a consumable material for elevator machines, in addition to supporting elevator new elevator machines, elevator wire rope is also widely used in the elevator maintenance market.
With the increasing attention of the domestic society to the elevator operation and maintenance link, the elevator maintenance market has good development potential. According to industry practice, the average service life of wire rope for elevators is generally 3-5 years.
The demand in the elevator maintenance market is closely related to the domestic elevator ownership and the renewal speed of wire rope. According to statistics from the China Elevator Association, as of the end of 2022, the number of elevators in China was 9.6446 million.
The huge foundation of elevator ownership and the gradual improvement of elevator safety maintenance awareness directly drive the huge potential of elevator maintenance market demand in use.
New urbanization will bring demand for wire ropes for elevators.
The market demand for new elevators with wire ropes for elevators is positively correlated with the development of the elevator new elevator market, and the elevator market demand is mainly affected by the comprehensive impact of factors such as urbanization level and macroeconomic development status, and the continuous advancement of the urbanization process in mainland China has promoted the rapid development of the elevator industry to a large extent.
In recent years, the level of urbanization in the mainland has increased significantly, and according to statistics from the National Bureau of Statistics, the proportion of urban population has increased from 40.53% in 2003 to 65.22% in 2022.
Figure 33: In 2022, the proportion of urban population in mainland China will reach 65.22%, and the continuous acceleration of urbanization will bring demand for wire ropes for elevators
The policy is increased, and the demand for wire rope for elevators is expected to be released. With the development of the aging trend of the population and the general improvement of people's quality of life, the demand for elevators in existing buildings has gradually increased.
The Law of the People's Republic of China on the Construction of Barrier-free Environment, passed by the Supreme People's Court on June 28, 2023, states that governments at or above the county level should take measures to create conditions to promote the installation of elevators in existing multi-storey residences; At the same time, the owner of the house shall carry forward the traditional virtues of the Chinese nation such as being kind to one's neighbor and helping each other, strengthen communication and consultation, and cooperate with the installation of elevators or other barrier-free facilities in existing multi-storey houses in accordance with the law.
This marks the official inclusion of elevator retrofitting in the scope of law, which will be implemented from September 1, 2023. With the increase of new urbanization, old residential area renovation, urban renewal, etc., the demand for elevator wire rope industry is expected to accelerate the release, and the company's elevator wire rope business has ushered in a relatively good development environment.
4.2.2. The company is deeply engaged in the field of special wire rope, and the top two in the elevator wire rope industry
Elevator wire rope is currently the most important product in the company's special wire rope and rigging business. From 2015 to 2020, the revenue of the elevator wire rope business accounted for about 70% of the company's wire rope and rigging business revenue.
Since 2021, the company has merged three types of wire ropes and related products into wire ropes and their supporting rigging, and the wire rope and its supporting rigging business mainly for elevators achieved revenue of 314 million yuan in 2023H1, -1.74% year-on-year, mainly due to the poor market environment in 2022, the decrease in product orders and the delay in the delivery of some orders.
In 2022, the production and sales of the company's wire rope and rigging business decreased year-on-year, and the annual output of wire rope and its supporting rigging and synthetic fiber lifting belt rigging in 2022 was 5.93/0.18 million tons, -15.3/+2.09% year-on-year, respectively. In 2022, the annual sales volume of wire rope and its supporting rigging and synthetic fiber lifting belt rigging will be 5.76/0.18 million tons, respectively -15.41/+3.13% year-on-year.
23H1 The revenue of the company's wire rope and rigging business decreased slightly, and profitability declined.
In 2023H1, the company's wire rope and rigging business achieved revenue of 339 million yuan, -1.74% year-on-year, contributing 36.96% of the company's revenue, the company transformed into a photovoltaic business, and the proportion of traditional wire rope business gradually declined. In 2022, the company's wire rope and rigging business achieved a gross profit of 88 million yuan, -15.03% year-on-year, mainly due to the environmental impact of the macro market.
In terms of price, the unit price of the company's wire rope and supporting rigging in 2022 will be 10,636 yuan / ton, +3.52% year-on-year, and the gross profit per ton will be 1,523 yuan, +0.45% year-on-year.
The company's wire rope and other products business direct materials accounted for more than 80%, direct materials is the company's wire rope and other products cost component project, in 2022, direct material costs accounted for 83.43% of the cost of wire rope and other products, 2018-2022, direct material costs accounted for more than 80%.
In 2022, the domestic revenue of the company's wire rope and rigging products accounted for 92.52%, which was the main source of income.
The company's wire rope and rigging products are mainly sold in China, in 2022, the company achieved revenue of 717 million yuan in China, with a gross margin of 16.18%, and foreign sales achieved revenue of 58 million yuan, with a gross margin of 22.76%.
The company is in the forefront of elevator wire rope business, with strong competitiveness and leading position in the industry.
The main competitors in the same industry are Tianjin Goldman Sachs Wire Rope Co., Ltd. and Wuxi General Steel Rope Co., Ltd. According to the company's prospectus, from 2012 to 2014, the company's market share in the mainland elevator wire rope market was 17.78/17.19/15.27% respectively.
According to the company's annual report, from 2016 to 2018, the company's market share in the elevator industry ranked among the top two in the world. At present, the company has the world's top two market share in the elevator industry.
4.3. Reusable wire rope: Downstream applications are extensive, and industry demand is generally stable
4.3.1. The downstream market demand base is large, and the overall demand remains stable
Lifting wire rope is widely used in engineering machinery, port terminals, metallurgical mines, electric power and petrochemical, marine engineering and other industries. The wide application characteristics of reused wire rope ensure the huge demand base of the downstream market; At the same time, as a consumable material, the frequent replacement of reused wire ropes further ensures the stability of downstream market demand.
Wire rope for construction machinery is mainly used in cranes, rotary drilling rigs, tower cranes, piling machines and other engineering machinery, and the demand for supporting wire ropes for new construction machinery is increasing with the stable development of the construction machinery industry; At the same time, as a consumable material for construction machinery, the steel wire rope used for construction machinery has a large amount of application and frequent replacement, and its usage is generally several times the amount of steel wire rope used by the new machine of construction machinery. Construction machinery industry is one of the important pillar industries of national economic development.
In the medium and long term, under the background that the mainland economy will maintain stable growth, the domestic construction machinery market still provides long-term development potential impetus for the new machine market that reuses steel wire ropes. In addition, as a consumable material that is frequently replaced, the overall demand for wire rope in the field of construction machinery consumption remains stable. From January to July 2023, the sales volume of cranes in major construction machinery enterprises in mainland China was 1,460 units, -23.1% year-on-year, and the sales volume of the construction machinery industry was 135,300 units, -0.75% year-on-year.
The market demand for port wire rope can also be divided into two aspects: new machine matching and port consumption. The huge base and steady growth of port cargo throughput and container throughput provide a guarantee for port market demand. From January to July 2023, the cargo throughput of major ports along the mainland coast was 6.241 billion tons, +7.05% year-on-year.
4.3.2. The customer has deep resources and rich application cases
Lifting and reusing wire rope is an important business of the company's wire rope and rigging segment. From 2015 to 2020, the revenue of reused wire rope increased steadily, and from 2021, the company merged three types of wire rope and related products into wire rope and its supporting rigging. We expect that the company's reused wire rope is an important product in the company's wire rope and rigging business, and its proportion of revenue will increase year by year.
Deeply engaged in the industry for many years, rich customer resources.
The company has been operating in the wire rope and rigging industry for many years, accumulated rich customer resources, and established long-term and stable strategic cooperative relations with many well-known customers.
In the field of elevator wire rope, the products are equipped with domestic well-known brand elevators such as Mitsubishi Elevator, Schindler Elevator, Fujitec Elevator, KONE Elevator, Guangri Co., Ltd., etc., and continue to provide users with system solutions such as elevator wire rope selection, installation, use and maintenance; In the field of lifting wire rope, it maintains good cooperative relations with many construction machinery enterprises with global influence, such as Zoomlion, Sany Heavy Industry, XCMG Machinery, etc.; In the field of rigging, it provides supporting products for offshore engineering construction enterprises such as CNOOC, Sinopec, China Heavy Industry, CIMC, China State Construction International, and China Communications Construction.
The project cases are widely used.
The company's elevator wire rope is used in the construction of CCTV Building, Sanlitun SOHO, Hong Kong SAR Government Building, Guangzhou TV Tower, Shanghai Pudong International Airport and other well-known buildings.
The company's reused wire rope is used in the construction of Three Gorges Hydropower Station, Zoomlion Construction Site, Qingdao Port, Hua Tianlong crane ship, Daya Bay Petrochemical Project and other projects.
5. Enter architectural design and create a collaborative path of building + photovoltaic in the future
While focusing on its main business, the company acquired a 100% stake in Tongren Architectural Design (Suzhou) Co., Ltd. in April 2020. Founded in 1987, after more than 30 years of development, the company's business scope has continued to expand, the company's strength level has continued to rise, and now has the construction industry Grade A qualification, can undertake the design of corresponding construction projects and EPC general contracting business, and the scale is not limited.
Doujin Design is engaged in architectural design and EPC engineering management, the architectural design business mainly focuses on project scheme design, detailed design, construction drawing design, etc., and the design projects are mainly park plants, bus hubs and other projects; EPC project management business is the whole process management of EPC, covering EPC project planning, approval, cost, consulting, management, etc., the project is mainly EPC projects of public rental housing, comfortable housing, and industrial plants.
In terms of region, the future plan will take the Suzhou regional market as a starting point, break through territorial restrictions, and gradually participate in the national market competition.
In terms of business, in the future, the company's architectural design will integrate more photovoltaic elements, with the help of photovoltaic building integration (BIPV), to the downstream photovoltaic power station design, installation, investment and construction and zero-carbon park business expansion, explore the "architectural design + photovoltaic" industrial path and business model, give full play to the architectural planning and design traffic entrance, integrate industrial chain resources, promote the landing of multi-scenario projects, and help the company's business growth.
6. Risk Warning
Increased competition brought about by the expansion of industries that exceeded expectations led to the risk of prices falling more than expected.
At present, we have closely tracked the industry expansion plan and production progress, but if there are large new entrants and industry expansion beyond expectations, it may bring about intensified industry competition, resulting in the risk of price exceeding expectations, and adversely affecting the company's profitability.
Capacity construction and commissioning were not as expected. As a new generation of technical roadmap, TOPCon's capacity construction and operation require more complex and professional debugging and a lot of experience accumulation, if the company cannot complete the capacity construction and climbing on time, it will lead to lower shipments than expected.
Demand is less than expected. We expect that global PV installations are expected to maintain rapid growth in 2023, and if the overall demand level is less than expected, it may affect the shipments of enterprises related to the industrial chain in 2023, thereby affecting business performance.
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Report from [Foresight Think Tank]