20221027-招银国际-捷佳伟创-300724.SZ-3Q22_net_profit_+1.2x_YoY__A_clean_beat_6页_1mb

S.C New Energy Technology (300724 CH) Company Update Summary

Core Content

S.C New Energy Technology, a Chinese company specializing in solar cell equipment, reported strong financial performance in 3Q22, significantly exceeding market expectations. The company's net profit increased by 121% YoY to RMB313 million, driven by a 41% YoY revenue growth to RMB1.58 billion, a 0.4ppt YoY expansion in gross margin, and FX gains from the strong U.S. dollar. This performance reinforces the firm's positive outlook on its diversified technology offerings, including TOPCon, HJT, and Perovskite solar cell equipment.

Key Financial Highlights

• Revenue: RMB1.58 billion in 3Q22, up 41% YoY.
• Gross Margin: Expanded to 25.4%, up 0.5ppt YoY and 1.6ppt QoQ.
• Net Profit: RMB313 million in 3Q22, up 121% YoY.
• 9M22 Performance: Revenue and net profit grew 26% and 37% YoY to RMB1.08 billion and RMB821 million, respectively.
• Contract Liabilities: Increased by 28% YoY to RMB4.6 billion as of end-Sep, indicating robust order intakes.

Technology Advancements and Market Position

• S.C has secured 10GW of overseas TOPCon equipment orders via the PE-poly route, a technology path that offers higher solar cell efficiency, better production efficiency, and higher yield rates, which are critical for accelerating mass production.
• The company's key products cover TOPCon, HJT, and Perovskite solar cell production lines, with laser doping equipment currently in trial stages.
• The company's planned capacity expansion for TOPCon solar cells is expected to reach 147GW in 2023E and 217GW in 2024E, which is 60% higher than previous estimates, highlighting the growing demand for its equipment.

Earnings Forecast and Target Price

• CMB International Global Markets (CMBIGM) revised up its 2022E/2023E/2024E earnings forecasts by 21% / 9% / 8%, respectively.
• The target price was revised to RMB187, based on a 52x P/E multiple, which is 1SD above the historical average of 36x, reflecting the breakthroughs in new equipment.
• Reiterated BUY recommendation, with a potential return of over 15% over the next 12 months.

Share Performance

• 1-month return: 12.9% absolute, 20.0% relative.
• 3-month return: 16.9% absolute, 35.7% relative.
• 6-month return: 179.1% absolute, 193.6% relative.
• Current Price: RMB148.61.
• Target Price: RMB187.00, implying a +26% upside.

Key Ratios and Metrics

• EPS: RMB2.99 (2022E), RMB3.59 (2023E), RMB4.72 (2024E).
• Net Profit Margin: Increased to 17.9% in 2022E.
• ROE: Improved to 18.1% in 2024E.
• P/E Ratio: Ranged from 91.1x (2020A) to 31.5x (2024E).
• P/B Ratio: Ranged from 15.7x (2020A) to 5.3x (2024E).
• Operating Efficiency: Improved, with GP margin reaching 25.6% in 2022E and core operating margin at 19.6%.

Risks

• Downstream capacity expansion: Weaker-than-expected growth could impact demand for S.C's equipment.
• Technology transformation risk: The transition to new solar cell technologies could affect the company's market position.

Financial Summary

• Revenue Growth: Expected to increase by 30% in 2023E and 30% in 2024E.
• Net Profit Growth: Projected to grow by 20% in 2023E and 31% in 2024E.
• Cash Flow: Operating cash flow is expected to increase, with CAPEX and financing activities showing varied trends.
• Balance Sheet: Total assets are projected to grow from RMB9.28 billion in FY20A to RMB20.71 billion in FY24E. Shareholders' funds are expected to increase from RMB3.035 billion in FY20A to RMB9.847 billion in FY24E.

Analyst Certification and Ratings

• The analyst certifies that the views expressed in the report accurately reflect their personal opinions.
• CMBIGM Ratings:
  • BUY: Stock with potential return of over 15% over next 12 months.
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months.

Legal and Regulatory Disclosures

• The report is intended for specific investors and not for general distribution.
• CMBIGM is not a registered broker-dealer in the U.S. or Singapore, and the report may not be provided to certain categories of investors without prior consent.
• The report is not an offer or solicitation to buy or sell any security and is provided for informational purposes only.

Summary

S.C New Energy Technology has demonstrated strong performance in 3Q22, with notable revenue and net profit growth. The company's expansion in the TOPCon equipment market, especially via the PE-poly route, is a key driver of its success. CMBIGM has revised its earnings forecasts and target price upwards, reaffirming a BUY recommendation. Despite the positive outlook, there are risks associated with downstream demand and technology shifts that could impact future performance. The report provides detailed financial and operational data, as well as key ratios, to support the investment analysis.