Dike shares' performance soars by 2336.51%, how long can the TOPCon volume bonus

Benefiting from the strong global demand for photovoltaic (PV) products and the rapid industrialization of N-type cells, the silver paste industry continues to experience robust demand.

On the evening of February 28, 2023, DKS Technology Co., Ltd. (300842.SZ) released its annual report for the year 2023. The company achieved a total revenue of 9.602 billion yuan, a year-on-year increase of 154.94%; it realized a net profit attributable to the parent company of 386 million yuan, a year-on-year increase of 2336.51%; it realized a net profit attributable to the parent company after deducting non-recurring gains of 343 million yuan, a year-on-year increase of 2829.96%; it achieved a basic earnings per share of 3.85 yuan, a year-on-year increase of 2364.71%. The company plans to distribute a cash dividend of 8 yuan (including tax) for every 10 shares to all shareholders, and to issue 4 additional shares for every 10 shares through capital reserve.

The rapid increase in N-type conductive silver paste led to a 2336.51% surge in performance.

Photovoltaic silver paste is a very important part of the photovoltaic industry chain.

According to industry estimates, as a key material for photovoltaic products, the cost of silver paste accounts for about 10%-12% of the cost of photovoltaic cells, second only to the cost of silicon wafers, making it the largest non-silicon cost for photovoltaic cells.

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Since 2022, photovoltaic cell technology has rapidly evolved from P-type PERC cells to N-type TOPCon and HJT cell technologies, especially the TOPCon cell technology, which has entered a period of industrialization explosion. According to the China Photovoltaic Industry Association (CPIA) estimates in 2022, compared to the 65mg of front silver used per PERC cell, the silver paste consumption per TOPCon cell has increased to 115mg, a nearly 80% increase, while the silver paste consumption per HJT cell has almost doubled. Therefore, the rapid development of N-type cell technology has significantly driven up the consumption of conductive silver paste.

The announcement shows that in 2023, DKS Technology's photovoltaic conductive silver paste achieved sales of 17,136.2 tons, a 137.89% increase from the previous year; among them, the full set of conductive silver paste products applied to N-type TOPCon cells achieved sales of 10,084.8 tons, and the proportion of the company's total sales of photovoltaic conductive silver paste products increased rapidly to 58.85%, leading the industry.

In addition, apart from the increase in the consumption of silver paste per unit, the silver paste for TOPCon cells with higher technical difficulty and low-temperature silver paste for HJT cells also bring an increase in the processing fee per unit of silver paste. According to the investor research notes of DKS Technology, the company's PERC silver paste processing fee is relatively stable, and the processing fee for TOPCon silver paste is 40%-50% higher than that for PERC silver paste, while the processing fee for HJT silver paste is even higher than that for PERC and TOPCon.

In terms of profitability, in 2023, the gross profit margin of the company's photovoltaic silver paste business reached 11.66%, an increase of 2.07 percentage points from 2022, with the corresponding unit gross profit of about 618 yuan/kg, a year-on-year increase of 166 yuan/kg, reflecting the company's full benefit from the increase in the proportion of TOPCon paste in profit center.

It is worth noting that silver powder is the main raw material for photovoltaic silver paste, accounting for as much as 98% of the raw material cost of silver paste. In the past, the company's main supplier of silver powder was DOWA. In recent years, in order to reduce costs and reduce the dependence on raw materials, the company has continuously introduced domestic silver powder, and the proportion of purchases from DOWA has continued to decline. According to the investor research record announcement of DKS Technology on November 14, 2023, the domestication rate of the company's PERC silver powder has reached more than 80%, the domestication rate of TOPCon silver powder is about 50%, and HJT is still mainly imported silver powder. With the future increase in the proportion of domestic silver powder, costs are expected to further decrease.Laser-assisted sintering technology (LECO) has significantly enhanced the conversion efficiency of TOPCon solar cells. LECO has set upgraded requirements for the silver paste process, which is technically challenging. China Gold Company believes that during the introduction phase of LECO, there may be a noticeable premium on the processing costs of the paste, and enterprises with sufficient technical reserves are expected to seize a higher market share during the technology iteration window, benefiting more fully from the new technology dividends. Currently, Dike Shares' progress in the introduction of LECO paste is relatively leading, and the company is optimistic about continuously consolidating its leading position in TOPCon paste and ushering in another period of high growth in both volume and profit.

Although Dike Shares leads in LECO paste layout, the second growth curve still needs to be refined.

Solar cell manufacturers are accelerating the introduction of LECO technology, and it is widely expected that from the first quarter of 2024, it will become a standard configuration for TOPCon.

Dike Shares leads in the layout of LECO paste. According to announcements, the company has innovatively developed laser-enhanced sintering conductive paste specifically for p+ emitters of TOPCon solar cells, with an overall efficiency improvement of 0.3%-0.5% in the first phase. New products such as n-Poly silver paste for the backside of TOPCon and p-Poly laser-enhanced sintering conductive paste have also been launched simultaneously. The relevant products began to be mass-produced and introduced to some downstream customers in the fourth quarter of 2023.

In addition to TOPCon, the company continues to invest in emerging technology route products such as N-type HJT low-temperature silver paste and silver-clad copper paste, and silver paste for IBC solar cells, all of which have achieved scaled supply. With the improvement of HJT cost reduction and efficiency enhancement, and the popularization of silver-clad copper applications, it is expected to become a new growth point outside of TOPCon.

The company's R&D technology is leading, and the construction of the R&D team is continuously strengthened. From 2019 to 2023, the company's R&D investment has been growing, accounting for about 3% of its revenue. In 2023, the company's R&D expenditure was about 310 million yuan, a year-on-year increase of 170%. The company has been continuously strengthening the construction of the R&D team, and by the end of 2023, it had 233 R&D personnel, accounting for 38.32% of the total number of employees. At the same time, the company's first public offering investment project, the R&D center, has been completed and put into use, which is expected to further enhance R&D strength and technological innovation capabilities.

According to relevant announcements from leading photovoltaic silver paste companies such as Dike Shares, Suzhou Good-Ark, and Juhe Shares, the funds required for a photovoltaic silver paste production capacity of 500 tons to 1,700 tons range from 150 million to 270 million yuan, with the investment cost per ton of photovoltaic silver paste production line being between 160,000 and 530,000 yuan. The construction period can be completed in as short as one year. This means that there is indeed a limited barrier to capacity in photovoltaic silver paste.

However, the industry generally expects that from 2024 to 2028, the global photovoltaic new photovoltaic installations will enter a plateau period, and there may even be a few years of contraction. The forecast report released by the China Electricity Council has given a forecast of 171GW for this year's new photovoltaic installations, which is a significant drop from last year's "astronomical" amount.

Although the increase in N-type battery volume means a rise in both price and quantity for silver paste companies, if downstream demand is no longer strong, after the rapid expansion wave, the silver paste industry is inevitably at risk of price wars, and seeking a second growth curve is imminent.

Based on the shared conductive silver paste technology platform, Dike Shares is trying to layout semiconductor pastes to create a second growth curve. The company has been continuously upgrading and improving the semiconductor chip packaging silver paste products with a conventional thermal conductivity of <10 W/m °K and a high thermal conductivity of 10-30 W/m °K. It has also launched sintering silver products with an ultra-high thermal conductivity of >100 W/m °K for applications such as power semiconductor packaging. At the same time, the company has actively laid out and launched products such as brazing paste for power semiconductor packaging AMB ceramic substrates.In 2023, the company's semiconductor packaging paste revenue increased by 150.71% year-on-year to 9.0047 million yuan, growing relatively quickly but still accounting for a relatively low proportion of total revenue.