CMB International Securities | Equity Research | Company Update Summary
Core Content
This report provides an analysis of S.C New Energy Technology (300724 CH), a Chinese solar power equipment supplier. The research highlights the company's strong performance and positive outlook for the upcoming fiscal years, with a BUY recommendation and a target price of RMB 185.00.
Key Positives
- Strong order intakes: The company is expected to see strong demand for equipment upgrades in FY21E, driven by the shift to larger wafer formats (M6 to M10/G12) and the adoption of advanced technologies like PERC+ and TOPCon.
- Margin stabilization: Gross margin is anticipated to stabilize in FY21E-22E, with the company's new product lines expected to drive improved profitability.
- Technology leadership: S.C New Energy is well-positioned to capture the market for advanced equipment, such as HJT, with its RPD technology offering conversion efficiency gains.
- Earnings forecast uplift: The company's earnings are expected to grow at a 46% net profit CAGR from FY20E to FY22E, leading to a 5–6% increase in earnings estimates for these years.
- Positive valuation: The target price of RMB 185.00 is based on a 1.5x PEG and a 42% diluted EPS CAGR.
Main Points
Revenue and Profit Growth
- Revenue: Expected to grow steadily, reaching RMB 8,215 million in FY22E.
- Net profit: Projected to increase from RMB 602 million in FY20E to RMB 1,286 million in FY22E.
- EPS: Estimated to rise from RMB 1.88 in FY20E to RMB 4.00 in FY22E.
Market Position and Technology
- Product offering: Comprehensive range of equipment including diffusion & deposition, wet process, automation, and parts.
- Technology edge: S.C has the capability to provide PERC+ and TOPCon equipment, which are more efficient and cost-effective compared to HJT.
- HJT progress: The company became capable of offering a complete HJT production line in December 2020, with potential for further advancements.
Key Catalysts
- Release of FY20E preliminary results
- Completion of A-share non-public placement
Risks
- Downstream demand: Weaker-than-expected capacity expansion or upgrade demand.
- Margin recovery: Slower recovery of gross margin.
- Client financials: Deterioration in clients' ability to pay.
Financial Highlights
Earnings Summary
| FY |
Revenue (RMB mn) |
Net Income (RMB mn) |
EPS (RMB) |
| FY18A |
1,493 |
306 |
1.12 |
| FY19A |
2,527 |
382 |
1.19 |
| FY20E |
4,169 |
602 |
1.88 |
| FY21E |
6,237 |
951 |
2.96 |
| FY22E |
8,215 |
1,286 |
4.00 |
Valuation Metrics
| Metric |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| P/E (x) |
129.5 |
121.6 |
77.3 |
49.0 |
36.2 |
| P/B (x) |
20.8 |
18.2 |
15.2 |
11.8 |
9.0 |
| ROE (%) |
19.4 |
16.0 |
21.4 |
27.0 |
28.2 |
| Net gearing |
Net cash |
Net cash |
Net cash |
Net cash |
Net cash |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
0.7 |
-10.2 |
| 3-mth |
40.7 |
20.7 |
| 6-mth |
61.0 |
36.3 |
Market Cap and Shareholding
| Metric |
Value (RMB mn) |
| Market Cap |
46,612 |
| Avg 3 mths t/o |
510.47 |
| 52w High/Low |
158.88/45.80 |
| Total Issued Shares |
321.2 |
Shareholding Structure
| Shareholder |
% Ownership |
| YU Zhong |
9.13% |
| LIANG Meizhen |
8.86% |
| ZUO Guojun |
8.29% |
Competitive Landscape
- China Solar Power Equipment Suppliers: S.C is compared with peers like Jingsheng, Suzhou Maxwell, and NAURA, with S.C showing strong growth in net profit and EPS.
- Global Peers: Companies like Meyer Burger, Centrotherm, and Manz are also mentioned, but S.C remains a key player in the Chinese market.
Financial Ratios
| Ratio |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Gross Profit Margin |
40.1 |
32.1 |
27.1 |
27.8 |
28.1 |
| Net Profit Margin |
20.5 |
15.1 |
14.4 |
15.3 |
15.7 |
| ROE (%) |
19.4 |
16.0 |
21.4 |
27.0 |
28.2 |
| ROA (%) |
8.7 |
7.3 |
8.4 |
10.1 |
10.8 |
Analyst Certification
The analyst certifies that:
- The views expressed reflect personal opinions.
- No compensation was directly or indirectly linked to the report's content.
- No trading activity occurred in the stock within 30 days before the report's release.
- No financial interest in the company exists.
CMBIS Ratings
- BUY: Stock with potential return of over 15% over the next 12 months.
- HOLD: Stock with potential return of +15% to -10%.
- SELL: Stock with potential loss of over 10%.
- NOT RATED: Not rated by CMBIS.
- OUTPERFORM: Industry expected to outperform the market.
- MARKET-PERFORM: Industry expected to perform in line with the market.
- UNDERPERFORM: Industry expected to underperform the market.
Important Disclosures
- Risk warning: Investing in securities carries risks; past performance does not guarantee future results.
- No individual advice: CMBIS does not provide individually tailored investment advice.
- Liability disclaimer: CMBIS is not liable for any losses incurred from reliance on the report.
- Use restriction: The report is for the intended recipients only and cannot be reproduced or distributed without consent.
- Jurisdiction-specific restrictions:
- United Kingdom: Only for certain qualified individuals.
- United States: Only for "major US institutional investors."
- Singapore: Distributed by CMBI (Singapore) Pte. Ltd., an exempt financial adviser.
Conclusion
S.C New Energy Technology is well-positioned to benefit from the ongoing transition to larger wafer formats and advanced solar cell technologies. The company's solid backlog, technological leadership, and growth potential support the BUY recommendation and the raised target price of RMB 185.00, reflecting a +27.5% upside from the current price of RMB 145.11. The report emphasizes the importance of monitoring key catalysts and potential risks, including downstream demand and margin recovery.
