Longji shares (601012): the change and change of photovoltaic leader

Longji shares (601012): the change and change of photovoltaic leader
Opinion focus on maintaining outperforming industry investment recommendations. Longji has bet on single crystals and date diamond lines in the past five years, leading the expansion of silicon wafer production, and has grown into the number one market leader in photovoltaics.We believe that the current strategic change of upstream and downstream integration and the constant factors in the company’s genes have become the key points of the company’s future development.  Reasons Integrated transformation opens up product premiums and new demand.We believe that integration will enable Longji to better grasp overseas demand, and achieve homogeneous competition through design innovation and brand building, or it will obtain excess returns.In 2019, Longji’s module exports are up to + 170%. With the increase in battery self-sufficiency, we expect that the integrated profit contribution in 2020/21 will exceed 2/3.During the 14th Five-Year Plan period, we believe that the land may be developed on the ground, and the successful construction of BIPV promoted by Longji is expected to add new impetus to revenue growth.  Internalized battery efficiency boosts dividends, accelerates mass production of M6 wafers, and reduces costs.We believe that Longji can rely on integrated production capacity and internalize the conversion efficiency from the mainstream 22% at the end of 2019 to the company’s 2020 mass production target of 23% (faster than the overall industry 22).(4% plan) The profit dividend generated will bring 4 alternative improvements in the integrated business net profit margin, and partly hedge the profit impact brought by the silicon wafer price reduction.At the same time, we believe that own production capacity can accelerate the promotion of M6 silicon wafers, reduce costs and increase competition.We estimate that M6 is approximately M2 and saves 5 on integrated capacity.81 cents / W processing cost, at current 1.Under the price of 8 yuan / watt PERC module, it is equal to the net interest rate of 3.2 single boosts.  Constant industry understanding and capital application advantages help companies cross the cycle.Longji accurately judged the single crystal revolution as early as 2013, and then effectively expanded its production capacity and scale advantage through an accurate financing rhythm basically once a year since listing.Not only has it released the accumulated internal technical advantages including the growing crystal process, diamond wire slicing, etc., it has also quickly seized market share and accelerated the replacement of polycrystalline products.We believe that accurate industry judgments that overlap with the virtuous cycle of effective financing expansion will help the company cross the technology transformation cycle.  Earnings forecasts and estimates Taking into account the acceleration of 4Q19 silicon wafer expansion and the company’s performance report, we raised our 19-year profit forecast by 5% to 50.900 million.Taking into account the 杭州夜网论坛 price pressure of the entire silicon wafer industry’s expansion, and the potential increase in the price of silicon materials to squeeze the gross profit margin, we lower the 2020 profit forecast by 9% to 59.300 million, with a profit forecast for 69 of 2021 at the same time.800 million.Maintain Outperform rating and 33.5 yuan target price, corresponding to 20.3 and 17.Four times this year and next year’s price-earnings ratio, which has continued to increase by 18% compared to the previous one, and is currently trading at 17.4 and 14.8 times this year and next year’s price-earnings ratio.  Risks Upside risks: Purification of inefficient production capacity does not cause the price of silicon raw materials to increase or the industry’s expansion of production results in the price of lead wafers not falling; Downside risks: Overseas 北京夜生活网 PV demand / Domestic grid connection progress is less than expected.