Soochow: Accelerating industrialization of new technologies in the photovoltaic industry, optimistic about leading equipment manufacturers to weather the cycle.

Soochow released a research report stating that in 2023, the photovoltaic industry experienced a supply-demand imbalance after TOPCo's large-scale expansion, downstream performance was under pressure, production expansion slowed down, and excess production capacity needed to be cleared. However, in reviewing each cycle of the photovoltaic industry, the core DRIVE is technological iteration. On the silicon wafer side, technological innovation is driven by silicon wafer thinning & low-oxygen monocrystalline furnace & tungsten wire diamond wire; on the cell side, the cost reduction and efficiency increase of new quality productivity HJT is accelerating, and since the end of 2023, HIT components have occupied an important position in the bidding of central state-owned enterprises. In terms of overseas markets, in the future, with the release of self-built production capacity in overseas countries/regions such as the United States, Europe, India, and the Middle East, as well as the rise of China's photovoltaic industry chain overseas layout, domestic equipment manufacturers will embrace the opportunity to go overseas. Soochow selected 11 key targets in the photovoltaic equipment industry: Zhejiang Jingsheng Mechanical & Electrical, Qingdao Gaoce Technology, LINTON, Suzhou Maxwell Technologies, Shenzhen S.C New Energy Technology Corporation, Wuhan DR Laser Technology Corp., Wuxi Autowell Technology Co., Ltd., Yingkou Jinchen Machinery, Kbc Corporation, Ltd., Shuangliang Eco-Energy Systems, Robotechnik Intelligent Technology. On the revenue side, the total operating income was 41.423 billion yuan in H1 2024, an increase of 11% year-on-year, with a slower growth rate compared to 2023. On the profit side, the total net profit attributable to the mother was 4.128 billion yuan in H1 2024, a year-on-year decrease of 31%, with profit decline mainly due to the slowdown in order acceptance pace and more impairment provisions. Profitability is at a low level, with a slight decrease in R&D expense ratio in H1. The overall gross profit margin in H1 2024 was 26.39%, down by 2.59% year-on-year; the sales net profit margin was 9.97%, down by 6.02% year-on-year, with the net profit margin decline mainly due to the provision for inventory and accounts receivable impairment; the period expense ratio was 8.58%, down by 1.78% year-on-year, R&D expenses were 1.115 billion yuan, down by 46% year-on-year, and the R&D expense ratio was 2.69%, down by 2.83% year-on-year. Future highlights of the photovoltaic equipment industry: (1) downstream clearance & technological iteration: In 2023, after the photovoltaic industry experienced a supply-demand imbalance due to TOPCo's large-scale expansion, downstream performance was under pressure, production expansion slowed down, and excess production capacity needed to be cleared. However, in reviewing each cycle of the photovoltaic industry, the core DRIVE is technological iteration. On the silicon wafer side, technological innovation is driven by silicon wafer thinning & low-oxygen monocrystalline furnace & tungsten wire diamond wire; on the cell side, the cost reduction and efficiency increase of new quality productivity HJT is accelerating, and since the end of 2023, HIT components have occupied an important position in the bidding of central state-owned enterprises; on the component side, new technologies such as 0BB & light-transmitting adhesive film & double-sided grid can be expected in the future. (2) Overseas opportunities: In the future, with the release of self-built production capacity in overseas countries/regions such as the United States, Europe, India, and the Middle East, as well as the rise of China's photovoltaic industry chain overseas layout, domestic equipment manufacturers will embrace the opportunity to go overseas. Investment recommendations: For silicon wafer equipment, it is recommended to focus on the leading silicon wafer equipment company Zhejiang Jingsheng Mechanical & Electrical (300316.SZ); for slicing outsourcing logic, it is gradually materializing Qingdao Gaoce Technology (688556.SH); for cell equipment, it is recommended to focus on the HJT complete line equipment leader Suzhou Maxwell Technologies (300751.SZ); for component equipment, it is recommended to focus on the leader of string welding machine Wuxi Autowell Technology Co., Ltd. (688516.SH). Risk warning: Photovoltaic installation volume is lower than expected, and the progression of new technology upgrades is slower than expected.