Company Analysis
LONGi Green Energy Technology (601012 CH/Buy) Better positioned to weather uncertainties
> Better positioned to weather uncertainties

3Q21 review

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).


Investment points

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.



 
FY (Dec) 2018 2019 2020 2021F 2022F 2023F
Revenue (CNYmn) 21,988 32,897 54,583 89,336 116,528 133,621
OP (CNYmn) 2,205 6,223 9,168 12,620 18,098 21,143
OP margin (%) 10.0 18.9 16.8 14.1 15.5 15.8
NP (CNYmn) 2,558 5,280 8,552 11,714 16,546 19,231
EPS (CNY) 0.74 1.40 2.27 2.22 3.13 3.64
ROE (%) 16.5 23.4 26.8 28.3 29.8 26.1
P/E (x) 19.0 17.7 40.7 45.2 32.0 27.5
P/B (x) 2.9 3.3 9.8 11.2 8.3 6.3
Source: Company data, Mirae Asset Securities Research estimates



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Author
One Asia Research Team
Date
2021-11-02
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