Flat(601865) HTSC·2024-10-30 09:00Investment Rating - The report downgrades the investment rating to "Buy" for both A-shares and H-shares of the company [7]. Core Views - The company's Q3 revenue was 3.91 billion RMB, down 37.0% year-on-year and 21.4% quarter-on-quarter, with a net profit attributable to shareholders of -0.2 billion RMB, indicating a shift from profit to loss [1][2]. - The decline in profitability is primarily attributed to the significant drop in photovoltaic glass prices, leading to a low gross margin of 6.0% in Q3, the lowest in nearly five years [2]. - The report emphasizes the need to monitor supply-side changes due to ongoing production cuts in the industry, suggesting that supply may continue to decrease in the future [4]. Summary by Sections Q3 Performance - Q3 revenue was 3.91 billion RMB, a decrease of 37.0% year-on-year and 21.4% quarter-on-quarter; net profit attributable to shareholders was -0.2 billion RMB, marking a transition from profit to loss [1]. - The gross margin for Q3 was 6.0%, down 18.6 percentage points year-on-year, indicating significant pressure on profitability [2]. Cash Flow and Expenses - The operating cash flow for the first three quarters was 3.02 billion RMB, an increase of 30.4% year-on-year, with Q3 cash flow at 1.27 billion RMB, up 54.2% year-on-year [3]. - The company experienced asset impairment losses of -0.11 billion RMB in Q3, which may become a significant factor affecting profits if photovoltaic glass prices continue to decline [3]. Supply and Inventory - As of late October, the daily melting capacity of domestic photovoltaic glass was 102,000 tons, up 7.4% year-on-year, but inventory levels remained high at 38 days, a 100.7% increase year-on-year [4]. - The report suggests that despite ongoing production cuts, inventory pressure remains significant, and future supply-side changes should be closely monitored [4]. Profit Forecast and Valuation - The profit forecasts for 2024-2026 have been revised down to 0.93 billion, 0.92 billion, and 1.79 billion RMB respectively, reflecting the impact of declining photovoltaic glass prices [5]. - The target price for A-shares is set at 26.92 RMB, and for H-shares at 15.17 HKD, both reflecting a downgrade from previous estimates [5].