In line with consensus
• For 3Q21, LONGi Green Energy Technology (LONGi) reported revenue of CNY21.1bn (+54% YoY) and net profit attributable to owners of the parent of CNY2.56bn (+14% YoY).
• Gross margin was 19% (-6.9%p YoY, -3.4%p QoQ), and net margin was 12% (-4.2%p YoY, -0.8%p QoQ).
• For the first nine months of 2021, revenue was CNY56.2bn (+66% YoY), and net profit attributable to owners of the parent was CNY7.55bn (+19% YoY).
• Gross margin was 21% (-6.5%p YoY), and net margin was 13% (-5.3%p YoY).
• Both top line and bottom line are growing on the back of a strong global PV market, but rising prices of polysilicon (raw material) are continuing to pressure margins.
• Wafer external sales have declined as a result of utilization cuts by cell/module manufacturers. Internal supplies (in-house module production) are increasing, but this has led to overall margin contraction (2020 gross margin: 30% for wafers vs. 21% for modules).
Reiterate Buy and raise TP by 8.7% to CNY125
• We adjust up our 2022 and 2023 net profit estimates by 9.4% and 6.1%, respectively, reflecting slight upward revisions to wafer/module ASP.
• Our target price equates to a P/E of 40x our 2022F EPS.
• We believe the rise in raw material prices is unsustainable and expect massive capacity ramp-ups to help stabilize prices from 2H22.
• While near-term uncertainties exist, we believe LONGi is better positioned than its peers to withstand challenges given its superior cost advantages and vertically integrated model.
• Such strong fundamentals should enable the company to further expand its market share by investing in capacity expansions and technology development. LONGi is targeting market shares of 50% for mono-Si wafers and 30% for mono-Si modules over the medium and long term.
• We continue to have a bullish outlook on the global solar PV market and believe LONGi will be the biggest beneficiary. However, we recommend investors take a long-term approach in light of current share prices, which are at a historic high.
|OP margin (%)||10.0||18.9||16.8||14.1||15.5||15.8|
|Source: Company data, Mirae Asset Securities Research estimates|
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