GCL TECH(HK:03800) First Shanghai Securities·2024-09-04 08:48Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 1.54, representing a potential upside of 35% from the current price [2][4]. Core Insights - The company's revenue for the first half of the year decreased by 57.7% year-on-year to RMB 8.86 billion, with a gross loss of RMB 550 million, primarily due to a 68% drop in silicon material prices and an inventory impairment of RMB 820 million [2]. - The company sold 126,000 tons of granular silicon in the first half, a 25% increase year-on-year, with silicon material revenue of RMB 4.86 billion and an average price of RMB 40.3 per kilogram [2]. - The company is expected to further reduce costs, with cash costs for granular silicon projected to fall below RMB 30 per kilogram after the completion of upgrades at its four major bases [2]. Financial Summary - Total revenue for 2022 was RMB 35.93 billion, with a projected decline to RMB 17.00 billion in 2024, followed by a recovery to RMB 31.15 billion in 2026 [5][6]. - Shareholder net profit is expected to be negative RMB 2.25 billion in 2024, with a recovery to RMB 2.71 billion in 2026 [5][6]. - The company’s net profit margin is projected to improve from -18% in 2024 to 10% in 2026 [6]. Production and Quality Improvement - The company has achieved significant improvements in the quality of granular silicon, with 95% of products meeting the stringent impurity standards [2]. - The company’s major clients accounted for 62.2% of total shipments in the first half, indicating strong demand and potential for increased market share [2]. Market Outlook - The report anticipates that the silicon material prices will stabilize, and the company is expected to recover cash profitability ahead of the industry [2]. - The long-term outlook remains positive due to the company's ability to enhance production capacity and maintain a competitive edge in the low-carbon segment [2].