Northeast Securities: Longji shares have become the double leader of domestic silicon wafers and components, maintaining the "buy" rating.

The company announced on May 18 that the total amount of A-share convertible bonds to be issued would not exceed 7 billion yuan. The funds raised are mainly used for the annual production of 15GW single crystal high efficiency single crystal battery project of Xixian Leye, Ningxia Leye annual 5GW single crystal high efficiency battery project (Phase I 3GW) and supplementary liquidity.

Take the lead in the layout of N-type batteries to create integration and stronger competitiveness. The efficiency and cost ceiling of PERC battery make it enter the bottleneck period of technology and profit, and the pace of production expansion of PERC battery in domestic enterprises slows down. All companies are laying out new battery technology, but Longji is the first to carry out mass production of N-type batteries, which is expected to achieve the release of Yinchuan 3GW battery capacity by the end of this year. The production capacity of the company's battery and components will be 30GW and 50GW in 2020. The new battery technology will not only have a stable sales channel, but also enhance the competitiveness of component products and gain recognition from downstream customers in advance, forming efficiency and sales premium, and strengthening the company's integrated product competitiveness and profitability.

Rising abruptly based on accumulated strength, the new battery technology is expected to enjoy a longer technology lead. The company has sufficient battery technology reserves, and the conversion efficiency of N-type single crystal double-sided TopCon batteries based on commercial size has exceeded 25% for the first time in the world, and has stored a large number of R & D achievements in the next generation of N-type high-efficiency batteries such as HJT and IBC, as well as perovskite, laminated and other new batteries. The new N-type battery technical team invested more than 200 people, and after about a year and a half of pilot production verification, the efficiency is more than 24%, far exceeding the existing PERC battery level. Through the forward-looking technology layout and equipment supply chain management, the company is expected to lock the technological advantage in the hands of the company, and enjoy a longer period of technological leadership.

The production expansion of the new battery continues to increase the size to gain the advantage of scale. The company continues to add N-type battery expansion projects, which have been announced as Yinchuan 3GW, Qujing Phase I 10GW, Xixian New area 15GW, Yinchuan 5GW (Phase I 3GW). In total, the production capacity of N-type silicon wafer batteries reaches 33GW. With the production of new battery technology, the company's scale advantage and first-mover advantage will be more significant.

Profit forecast: the integrated layout of the company is more perfect, and it has become the double leader of domestic silicon wafers and components. In addition, the company actively layout new battery technology, will always maintain the lead in the technology of the battery chip. The company's integrated competitiveness is expected to lead the industry in all directions. Long-term accumulated R & D strength and industry experience prove that the company is excellent in management, innovation and operation. It is estimated that the EPS from 2021 to 2023 will be 2.98, 3.33, and 3.96 yuan, respectively, and the corresponding PE will be 33x, 30x, 25x, respectively, maintaining the "buy" rating.

Risk hint: the price of silicon wafers and components has dropped more than expected, and the demand of the industry has declined.