Tongwei (600438): short-term pressure on gross profit margin to expand production and reduce costs to support performance

Tongwei (600438): short-term pressure on gross profit margin to expand production and reduce costs to support performance
1.Event company announced the first three quarters of 2019 results announcement, the company achieved revenue of 280.25 ppm, an increase of 31 in ten years.03%; net profit attributable to mother 22.430,000 yuan, an increase of 35 in ten years.twenty four%.The company achieved revenue of 119 in the third quarter.10,000 yuan, an increase of 33 in ten years.32%; net profit attributable to mother 7.92 ppm, a ten-year increase of 7.02%. 2.Our analysis and judgment are under short-term pressure on gross profit margin.The company’s overall gross profit margin for the third quarter of 2019 was 15.68%, down 6 from the previous month.18 averages, falling by 2 each year.The gross profit margin of 12 units is under pressure in the short term, mainly due to: (1) the slow start of the domestic photovoltaic market in the third quarter, which led to the decline in battery prices; (2) the aquaculture industry was relatively sluggish, and the company seized market share through partial concession. The expense ratio increased slightly.In the first three quarters of 2019, the company’s overall cost subsidy10.24% (one year +1.00pct), in which R & D, sales, management, and financial expense ratios are 2.33%, 2.75%, 3.32%, 1.84%, respectively +0.57pct, -0.46pct, +0.12pct, +0.77pct.Among them, the primary purpose of the company’s increase in financial costs is to: (1) gradually transfer the project to solid; (2) convertible bonds accrue interest according to the actual interest rate method. High-purity crystalline silicon: scale and cost continue to lead.The company has formed high-purity crystalline silicon production capacity 8 at the end of 2018, which are located in Leshan and Baotou respectively. Through cumulative conversion, the proportion of single crystal materials has continued to increase (80% -85% by the end of 2019), driven by scale effects.Costs continue to fall (expected to be less than 4 million / ton) and continue to lead. Cells: Expansion of production against the trend, cost down, market share increased.The company has formed a solar cell capacity of 12GW, which is respectively located in Hefei and Chengdu. In addition, the high-efficiency single-crystal battery capacity is under construction of 8GW (Chengdu Phase IV and Meishan Phase I projects). It is expected to be completed and put into operation in the end of 2019 to the first half of 2020.By then, the company’s battery capacity will reach 20GW, and the scale advantage will be further highlighted.At the same time, the decline in prices in the third quarter may restrain the industry’s expansion expectations, and the company’s market share is expected to continue to increase.At present, the company’s non-silicon monocrystalline cell cost is about zero.2-0.25 yuan / W, through the subsequent use of large-sized silicon wafers, the comprehensive non-silicon cost gradually realized to zero.2 yuan / W is close. 3.Investment suggestion The company is a global leader in silicon materials and solar cells for the photovoltaic industry. Its scale and cost advantages are prominent.We believe that the scale of the domestic photovoltaic industry is expected to start from the fourth quarter of 2019 to the first quarter of 2020. Product prices may stabilize accordingly. Overlapping companies will increase their production capacity and start production one after another.We estimate the company’s operating income for 2019-2021 to be 359.4.6 billion, 424.810,000 yuan, 485.760,000 yuan, EPS is 0.74 yuan, 0.96 yuan, 1.13 yuan, corresponding to the current total PE is 16.6 times, 12.8 times, 10.9 times, covering the company for the first time with a “recommended”杭州桑拿 rating. 4.Risk prompts 1) Risks of PV demand falling short of expectations; 2) Risks of falling PV industry chain prices falling below expectations; 3) Risk of battery technology innovation