EGING PHOTOVOLTAIC TECHNOLOGY(600537)OUTLINES OF IN 銆€銆€Company Profile

　　EGing Photovoltaic Technology Co., Ltd. is a China-based company, principally engaged in photovoltaic industry business. Its products mainly include solar modules, including single crystal components, polycrystalline components and double glass components, solar cells, as well as silicon wafers. The Company is also engaged in power generation business and power stations construction. It distributes its products within domestic markets and to overseas markets.(Source: MarketScreener)

　　Investment Highlights

　　EGing Photovoltaic Technology Co., Ltd. (鈥淓Ging鈥? the company) has been working hard in modules for ages, and is also a long-term and stable supplier for the SOEs and central SOEs.

　　Founded in 2003, EGing mainly engages in growth of crystal ingots, slicing of silicon wafers, preparation of batteries, sealing of modules and photovoltaic power generation.

　　The company, taking quality as the top priority, has been in close cooperation with enterprises such as State Power Investment Corporation Limited, China Huaneng Group CO., LTD. China Huadian Corporation Ltd, and CGNPC.

　　The company changed its controlling shareholder in 2019, and KEENSTAR, its current controlling shareholder, has been working hard in real estate development.

　　At 2011-end, EGing went public through the backdoor and inked a profit replenishment agreement. But as anti-dumping and anti-subsidizing policies in the US and Europe entered into a tough period, the profit target was hard to achieve.

　　The company鈥檚 former controlling shareholder sold his equity, and the company completed its equity transfer in 2019, making KEENSTAR as its largest shareholder.

　　As the market size of photovoltaic is expected to see a rise in 2023, and with the downward cycle of silicon materials, the profit of modules will likely improve.

　　According to price analysis on industrial chains, from November 2022 to January 2023, the downturn of silicon material prices made prices of silicon wafers and batteries go down while the profit of module recovered significantly, due to its attribute of futures and slower price responses.

　　With the price rebound of silicon materials in the middle of January, the profit recovery of modules was interrupted. We judge that with the further unleash of new production capacity for silicon materials, the prices of silicon materials are expected to further go down while the profit of modules is expected to recover once again.

　　The cost reduction and efficiency increase and scale effect, more proportions of shipment to overseas, and investments in capacity building of N-shape TOPCon will very likely push up the company鈥檚 long-term profits.

　　The total shipment is expected to reach 5.5~6GW in 2022, with annual growth topping 100%, and multiple expense rates were diluted significantly, showing its remarkable scale effect.

　　The company鈥檚 shipment to overseas markets in 2021 accounted for roughly 30% of its total, and the overseas sales in the first three quarters of 2022 grew to about 50%, reflecting a gradually better shipment structure.

　　The company鈥檚 production capacity of 10GW N-shape TOPCon is expected to be put into operation in June of 2023, a continuously leading position in the industry, and the company is expected to embrace a rise in both sales volume and profits.

　　Earnings forecast and investment recommendation

　　We estimated its net income attributable to shareholders at CNY 140 million in 2022, CNY 630 million in 2023, and CNY 830 million in 2024, implying a P/E ratio to 76.3x, 16.5x and 12.5x, based on the closing price on February 15 of 2023. We give it an 鈥淥utperform鈥?rating with the first coverage.

　　Potential risks

　　worse-than-expected operating and administration; intensified industry competition; changes in industry policies; weaker-than-expected effects of policies; less-than-expected demand in the downstream; a continuous rise in prices of raw materials; macroeconomic volatility; impacts of overseas policies

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