Abalance : 1Q FY24_Research Report_Abalance Corporation

Research Coverage Report by Shared Research Inc.	Coverage initiated on: 2023-05-18
Last update: 2023-12-27

3856

Abalance Corporation

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an "owner's manual" to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [e-mail].

INDEX

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3. Key Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.

Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6. Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6. Full-yearcompany forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Medium-termmanagement plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13. . Business overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. . Business overview by reportable segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14. . Earnings structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. .

Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21. . Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25. . Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27. .

Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27. . Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28. . .

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31. .

Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32. .

Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35. .

Abalance Corporation 3856

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ExecutiveAbalance Corporation (TSE Standard:summary3856) primarily manufactures and sells solar panels; the planning, development, sale, operation, and maintenance of solar power systems; and the sale of electricity generated by proprietary solar power plants. As a holding company, Abalance oversees and controls group management, while subsidiaries handle business operations. In FY06/23, consolidated revenue was JPY217.4bn and operating profit was JPY13.6bn. Businesses are managed under four reportable segments and Other businesses; the mainstay segments are the Solar Panel Manufacturing business (95.0% of consolidated revenue and 87.3% of operating profit before adjustments and inclusion of Other businesses) and the Green Energy business (4.7% and 12.6%).

The company was established in April 2000 as a developer and administrator of Internet services. In November 2011, it converted WWB Corporation (unlisted; planned, sold, and installed solar power systems) into a wholly owned subsidiary through an exchange of shares. In December 2020, Vietnam Sunergy Joint Stock Company (VSUN; unlisted), a Vietnamese solar panel manufacturer generating revenue over three times higher than Abalance at the time (FY06/21), was made into a consolidated subsidiary (the company held approximately 43.2% of voting rights at end-June 2023).

Solar Panel Manufacturing business: VSUN, which operates this business, was established in June 2015. Headquartered in the Bac Giang Province of Northeast Vietnam, VSUN has four solar panel plants in Vietnam with an annual production capacity totaling 5GW, and a cell plant scheduled for completion at end-October 2023 that will have an annual production capacity totaling 4GW. It sources raw materials from China and Southeast Asia, manufactures solar panels at its plants in Vietnam, and sells products mainly to the US, Europe, and other countries directly or through overseas branches. Since its establishment, the company has expanded VSUN's manufacturing capacity, making it one of the leading companies in Vietnam.

Green Energy business: Mainly operated by subsidiaries WWB and Valors Corporation, the Green Energy segment comprises a recurring revenue business (accounting for 30.1% of segment revenue in FY06/23) and a one-time revenue business (69.9%). The recurring revenue business is based on a model through which the company continues to own the solar power plants it either develops or acquires, earning income from selling the generated electricity to power utilities. In the one-time revenue business, the company engages in solar power plant trades with renewable energy consumers, sells products associated with power generation facilities, and engages in direct sales or uses agents to provide end-to-end services for solar projects (such as planning, engineering, development/construction, operation and maintenance, and recycling) to companies and consumers. Abalance plans to expand the portfolio of solar power plants under its ownership and further raise the revenue mix of its recurring revenue business to secure stable earnings.

The company's current portfolio includes over 110 solar power plants located in Japan and overseas, and the total output capacity of these facilities is over 140MW. Abalance seeks to achieve 1GW in total output capacity by 2030.

In September 2023, the company formulated a new medium-term management plan (FY06/24-FY06/26) that maintains a power generation capacity of 1GW in Japan and overseas, but aims to increase the annual production capacity of solar panels from 5GW in FY06/23 to 10GW in FY06/26, and the annual production capacity of cell plants from 4GW in late October 2023 to 10GW in FY06/26. To secure funds for future investments and other efforts, the company plans to borrow new funds and list VSUN's cell subsidiary, Vietnam Sunergy Cell Company Limited (hereinafter, "Cell Company"), on the US NASDAQ stock exchange through a special purpose acquisition company (SPAC).

Although the global solar panel market is characterized by oversupply and severe price competition, Shared Research understands that VSUN's competitors comprise mainly major solar panel manufacturers in China.

The International Energy Agency (IEA) predicts that global electricity demand will expand, with renewables such as solar and wind power becoming mainstream sources. IEA presents an outlook on installed capacity for each energy source based on three scenarios. In the most conservative scenario, it expects installed electricity capacity of solar power to grow from 1,145GW in 2022 to 4,699GW in 2030, and to 12,639GW in 2050. This will lead to expanded demand for solar panels, and amid a push toward the reevaluation of supply chains due to US-China trade frictions and other factors, Shared Research understands that demand will be particularly strong for solar panels made outside China, such as those of VSUN.

Earnings trends

In FY06/23, consolidated revenue was JPY217.4bn (+135.2% YoY), operating profit was JPY13.6bn (+699.4% YoY), recurring profit was JPY14.8bn (+880.1% YoY), and net income attributable to owners of the parent was JPY5.4bn (+528.0% YoY). OPM was 6.2% (1.8% in FY06/22). The increase in revenue and profits was due to strong panel sales in the European and the US

Abalance Corporation 3856

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markets, the launch of the fourth solar panel factory operation from January 2023, passing on the soaring prices of components and transportation costs, and the reduction in container freight rates.

The company's full-year forecast for FY06/24 projects revenue of JPY251.8bn (+15.8% YoY), operating profit of JPY15.8bn (+16.5% YoY), recurring profit of JPY15.8bn (+6.8% YoY), and net income attributable to owners of the parent of JPY7.0bn (+28.6% YoY). With the commencement of operations at the fourth solar panel factory and cell plant, the company plans to increase revenue by expanding its sales channels to the US, Europe, and other regions where solar panels are sold. In terms of profit, the company aims to secure stable earnings by producing cells in-house (procured externally up to now), setting panel sales prices according to component prices and container freight rates, and improving production efficiency.

The Abalance group has established a goal of becoming a core global company in the field of renewable energy by 2030 and positions building a supply chain for solar panel manufacturing and the Green Energy business as the engines for sustainable growth and maximization of corporate value. In September 2023, the company formulated a new medium-term management plan (FY06/24-FY06/26), which the company views as an acceleration phase toward achieving the goal. The company expects its revenue and operating profit to expand to JPY355.8bn and JPY30.8bn, respectively, by end-FY06/26, with an anticipated increase in OPM to 8.7%. CAGR during the plan period is expected to be 17.8% for revenue and 31.4% for operating profit.

Strengths and weaknesses

Abalance's strengths, according to Shared Research (See the "Strengths and weaknesses" section for details)

Achieves differentiation by expanding solar panel manufacturing capacity in Vietnam

With the addition of VSUN's manufacturing function, the company has formed a global supply chain and established the Japan brand, providing end-to-end services in Japan that no other peers can match

VSUN is well recognized by third-party organizations and major purchasers for both its sustainable procurement practices and its solar panel quality, comparable with major manufacturers

Weaknesses

VSUN, which manufactures solar panels in Vietnam, faces procurement risks as it sources materials from China, the main producer of key materials, but has started manufacturing cells, one of these materials

The scale of VSUN solar panel and cell manufacturing is still small compared to major manufacturers, but the company plans to expand its panel and cell manufacturing capacity, as well as manufacture ingots and wafers

To sustain a high level of investment using bank loans, the company must improve financial soundness, and plans to increase its equity ratio to 20% in FY06/26

Abalance Corporation 3856

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Key FinancialFY06/14	FY06/15	DaFY06/16	taFY06/17	FY06/18	FY06/19	FY06/20	FY06/21	FY06/22	FY06/23	FY06/24
Income statement(JPYmn)	Cons.		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Company
	forecast
Revenue	3,347		4,396	4,540	6,495	7,301	5,985	6,678	26,901	92,435	217,415	251,800
YoY	45.3%		31.4%	3.3%	43.1%	12.4%	-18.0%	11.6%	302.8%	243.6%	135.2%	15.8%
Gross profit	738		1,081	1,108	1,489	2,178	1,873	1,762	4,788	9,705	30,382
YoY	15.1%		46.5%	2.5%	34.4%	46.3%	-14.0%	-5.9%	171.7%	102.7%	213.1%
Gross profit margin	22.0%		24.6%	24.4%	22.9%	29.8%	31.3%	26.4%	17.8%	10.5%	14.0%
Operating profit	264		420	397	115	927	608	362	1,361	1,697	13,565	15,800
YoY	28.4%		59.5%	-5.5%	-71.0%	704.7%	-34.4%	-40.5%	276.4%	24.7%	699.4%	16.5%
Operating profit margin	7.9%		9.6%	8.8%	1.8%	12.7%	10.2%	5.4%	5.1%	1.8%	6.2%	6.3%
EBITDA	296		468	431	169	1,050	882	627	2,081	3,309	15,880
YoY	28.9%		58.3%	-7.9%	-60.8%	521.0%	-16.0%	-29.0%	232.1%	59.0%	379.9%
EBITDA margin	8.8%		10.6%	9.5%	2.6%	14.4%	14.7%	9.4%	7.7%	3.6%	7.3%
Recurring profit	241		339	427	49	874	566	306	1,269	1,510	14,799	15,800
YoY	108.5%		40.9%	25.8%	-88.6%	1700.1%	-35.2%	-46.0%	315.3%	19.0%	880.1%	6.8%
Recurring profit margin	7.2%		7.7%	9.4%	0.7%	12.0%	9.5%	4.6%	4.7%	1.6%	6.8%	6.3%
Net income attributable to owners of the	234		200	231	-176	757	316	211	537	867	5,445	7,000
parent
YoY	100.6%		-14.6%	15.8%	-	-	-58.2%	-33.1%	154.2%	61.5%	528.0%	28.6%
Net margin	6.99%		4.55%	5.10%	-2.7%	10.4%	5.3%	3.2%	2.0%	0.9%	2.5%	2.8%
Per-share data(JPY, stock split, adjusted for reverse stock split)
Shares issued(year-end; '000)	5,041		5,041	5,041	5,190	5,190	5,190	5,196	5,334	5,567	17,465
EPS	20.93		13.22	15.31	-	48.64	20.38	13.64	34.21	52.78	321.68	413.53
EPS(fully diluted)	20.69		13.21	-	-	48.48	20.38	-	33.70	52.69	318.45	-
Dividend per share	0.00		3.33	3.67	3.67	5.67	5.67	5.67	5.67	6.00	8.00	-
Book value per share	57.13		68.68	80.65	68.42	113.54	127.15	134.99	251.62	356.95	758.02	-
Balance sheet(JPYmn)
Total current assets	1,715		2,093	2,420	4,692	5,227	6,078	8,553	22,537	57,450	100,381
Cash and deposits	494		407	496	672	601	799	1,209	4,722	3,966	20,619
Notes and accounts receivable	408		525	473	335	335	393	303	1,312	6,156	2,011
Merchandise and finished goods	499		263	385	423	327	172	246	6,480	26,740	48,827
Tangible fixed assets	161		189	223	1,222	1,456	4,239	5,529	15,201	20,599	33,319
Intangible assets	81		61	5	290	217	195	110	365	4,688	7,523
Investments and other assets	115		188	142	195	289	459	554	1,268	2,432	2,820
Total assets	2,073		2,531	2,790	6,400	7,189	10,985	14,765	39,388	85,181	144,087
Total current liabilities	821		1,127	1,368	3,545	3,873	4,641	6,745	26,212	57,721	100,212
Total fixed liabilities	386		361	203	1,733	1,499	4,312	5,859	8,398	19,452	20,563
Total liabilities	1,207		1,488	1,571	5,279	5,373	8,953	12,605	34,611	77,174	120,776
Total net assets	866		1,043	1,219	1,121	1,816	2,032	2,159	4,777	8,007	23,310
Shareholders' equity(excl. stock acquisition	864		1,038	1,219	1,077	1,767	1,969	2,093	4,006	5,933	13,135
rights and and non-controlling interests )
Cash flow statement(JPYmn)
Cash flows from operating activities	-77		57	206	-984	405	-147	-861	-608	-6,348	19,273
Cash flows from investing activities	-116		-252	-75	-864	-559	-1,620	-472	-1,391	-13,321	-21,417
Cash flows from financing activities	393		104	-85	1,991	-62	1,913	1,465	5,290	17,752	17,235
Financial ratios
ROA (RP-based)	14.8%		14.7%	16.0%	1.1%	12.9%	6.2%	2.4%	4.7%	2.4%	12.9%
Return on equity(ROE)	34.2%		21.0%	20.5%	-15.3%	53.2%	16.9%	10.4%	17.6%	17.4%	57.1%
Equity ratio	41.7%		41.0%	43.7%	16.8%	24.6%	17.9%	14.2%	10.2%	7.0%	9.1%

Source: Shared Research based on company data

Notes: The company conducted a 100-for-1 stock split in FY06/14, and a 3-for-1 stock split in September 2022. Other changes in the number of shares outstanding are due to capital increases via third-party allotment and/or the exercise of share subscription rights

EBITDA is obtained by adding depreciation and goodwill amortization to operating profit Dividend per share (dividend per share ) has yet to be determined for FY06/24

Any differences between figures in the table and those in company data are due to rounding

Abalance Corporation 3856

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Trends and outlook

QuarterlyEarnings (q rterly)	trendsFY06/23and	resultsFY06/24				FY06/24
(cumulative) (JPYmn)	Q1	Q1-Q2	Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4		% of forecast	FY forecast
Revenue	55,729	112,071	164,824	217,415	57,740				22.9%		251,800
	YoY	468.4%	320.5%	196.2%	135.2%	3.6%							15.8%
Cost of revenue	50,953	99,357	144,475	187,033	49,131
	YoY	512.6%	354.0%	193.7%	126.1%	-3.6%
	Cost of revenue ratio	91.4%	88.7%	87.7%	86.0%	85.1%
Gross profit	4,776	12,714	20,348	30,382	8,608
	YoY	221.2%	166.7%	214.6%	213.1%	80.2%
	Gross profit margin	8.6%	11.3%	12.3%	14.0%	14.9%
SG&A expenses	3,147	7,546	10,366	16,816	3,935
	YoY	177.8%	78.1%	80.5%	110.0%	25.0%
	SG&A ratio	5.6%	6.7%	6.3%	7.7%	6.8%
Operating profit	1,629	5,167	9,982	13,565	4,673				29.6%		15,800
	YoY	360.2%	871.2%	-	699.4%	186.9%							16.5%
	Operating profit margin	2.9%	4.6%	6.1%	6.2%	8.1%							6.3%
Recurring profit	1,444	5,860	11,133	14,799	4,507				28.5%		15,800
	YoY	432.8%	-	-	880.1%	212.1%							6.8%
	Recurring profit margin	2.6%	5.2%	6.8%	6.8%	7.8%							6.3%
Net income attributable to owners of the parent	531	2,269	4,249	5,445	1,737				24.8%		7,000
	YoY	-37.9%	182.6%	447.6%	528.0%	227.1%							28.6%
	Net margin	1.0%	2.0%	2.6%	2.5%	3.0%							2.8%
Earnings (quarterly)		FY06/23				FY06/24
(JPYmn)	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue	55,729	56,342	52,753	52,591	57,740
	YoY	468.4%	234.4%	81.9%	43.0%	3.6%
Cost of revenue	50,953	48,404	45,118	42,558	49,131
	YoY	512.6%	256.7%	65.3%	26.9%	-3.6%
	Cost of revenue ratio	91.4%	85.9%	85.5%	80.9%	85.1%
Gross profit	4,776	7,938	7,634	10,034	8,608
	YoY	221.2%	141.9%	349.3%	209.9%	80.2%
	Gross profit margin	8.6%	14.1%	14.5%	19.1%	14.9%
SG&A expenses	3,147	4,399	2,820	6,450	3,935
	YoY	177.8%	41.8%	87.1%	184.9%	25.0%
	SG&A ratio	5.6%	7.8%	5.3%	12.3%	6.8%
Operating profit	1,629	3,538	4,815	3,583	4,673
	YoY	360.2%	-	-	267.9%	186.9%
	Operating profit margin	2.9%	6.3%	9.1%	6.8%	8.1%
Recurring profit	1,444	4,416	5,273	3,666	4,507
	YoY	432.8%	-	-	258.0%	212.1%
	Recurring profit margin	2.6%	7.8%	10.0%	7.0%	7.8%
Net income attributable to owners of the parent	531	1,738	1,980	1,196	1,737
	YoY	-37.9%	-	-	1214.3%	227.1%
	Net margin	1.0%	3.1%	3.8%	2.3%	3.0%

Source: Shared Research based on company data

Any differences between figures in the table and those in company data are due to rounding

Abalance Corporation 3856

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Revenue by segment
Revenue by segment(cumulative)		FY06/23				FY06/24
(JPYmn)	Q1	Q1-Q2		Q1-Q3	Q1-Q4	Q1	Q1-Q2	Q1-Q3	Q1-Q4
	Solar Panel Manufacturing business	53,250	107,304		155,945	206,568	55,495
		YoY	619.8%	372.2%		215.9%	153.5%	4.2%
		% of revenue	95.6%	95.7%		94.6%	95.0%	96.1%
	Green Energy business	2,309	4,425		8,357	10,130	2,066
		YoY	6.7%	22.3%		41.9%	-1.0%	-10.5%
		% of revenue	4.1%	3.9%		5.1%	4.7%	3.6%
	IT business	154	301		444	600	161
		YoY	-	-		-	105.5%	4.5%
		% of revenue	0.3%	0.3%		0.3%	0.3%	0.3%
	Photocatalyst business	10	18		29	40	9
		YoY	-58.3%	-67.3%		-59.2%	-50.0%	-10.0%
		% of revenue	0.0%	0.0%		0.0%	0.0%	0.0%
	Reportable segments total	55,724	112,050		164,776	217,340	57,733
		YoY	480.6%	324.2%		197.6%	136.0%	3.6%
		% of revenue	100.0%	100.0%		100.0%	100.0%	100.0%
	Other	5	21		47	75	6
		YoY	-97.6%	-91.3%		-83.3%	-77.0%	20.0%
		% of revenue	0.0%	0.0%		0.0%	0.0%	0.0%
Total	55,729	112,071		164,824	217,415	57,740
	YoY	468.4%	320.5%		196.2%	135.2%	3.6%
Revenue by segment(By quarter)		FY06/23				FY06/24
(JPYmn)	Q1	Q2		Q3	Q4	Q1	Q2	Q3	Q4
	Solar Panel Manufacturing business	53,250	54,054		48,641	50,623	55,495
		YoY	65.7%	1.5%		-10.0%	4.1%	9.6%
		% of revenue	95.6%	95.9%		92.2%	96.3%	96.1%
	Green Energy business	2,309	2,116		3,932	1,773	2,066
		YoY	6.7%	45.5%		73.1%	-59.2%	-10.5%
		% of revenue	4.1%	3.8%		7.5%	3.4%	3.6%
	IT business	154	147		143	156	161
		YoY	-	-		450.0%	-38.1%	4.5%
		% of revenue	0.3%	0.3%		0.3%	0.3%	0.3%
	Photocatalyst business	10	8		11	11	9
		YoY	-58.3%	-74.2%		-31.3%	22.2%	-10.0%
		% of revenue	0.0%	0.0%		0.0%	0.0%	0.0%
	Reportable segments total	55,724	56,326		52,726	52,564	57,733
		YoY	480.6%	235.0%		82.1%	43.1%	3.6%
		% of revenue	100.0%	100.0%		99.9%	99.9%	100.0%
	Other	5	16		26	28	6
		YoY	-97.6%	-52.9%		-35.0%	-36.4%	20.0%
		% of revenue	0.0%	0.0%		0.0%	0.1%	0.0%
Total	55,729	56,342		52,753	52,591	57,740
	YoY	468.4%	234.4%		81.9%	43.0%	3.6%

Source: Shared Research based on company data

Any differences between figures in the table and those in company data are due to rounding

Profit by segment

Profit by segment(cumulative)

(JPYmn)

Solar Panel Manufacturing business

YoY

% of total

Segment profit margin

Green Energy business

YoY

% of total

Segment profit margin

IT business

YoY

% of total

Segment profit margin

Photocatalyst business

YoY

% of total

Segment profit margin

Reportable segments total

YoY

% of total

Segment profit margin

Other

YoY

• of total Adjustments
  YoY
• of total
  Total YoY
  Operating profit margin
  Profit by segment(By quarter) (JPYmn)
  Solar Panel Manufacturing business YoY
• of total

Segment profit margin

Green Energy business

YoY

% of total

Segment profit margin

FY06/23

Q1	Q1-Q2	Q1-Q3	Q1-Q4
1,175	4,612	8,927	12,701
-	-	-	925.9%
72.1%	89.3%	89.4%	93.6%
2.2%	4.3%	5.7%	6.1%
640	932	1,650	1,837
27.7%	50.6%	113.7%	52.6%
39.3%	18.0%	16.5%	13.5%
27.7%	21.1%	19.7%	18.1%
1	11	17	47
-	-	240.0%	571.4%
0.1%	0.2%	0.2%	0.3%
0.6%	3.7%	3.8%	7.8%
-9	-23	-31	-40
-	-	-	-
-	-	-	-
-	-	-	-
1,808	5,532	10,563	14,546
278.2%	549.3%	777.3%	497.9%
111.0%	107.1%	105.8%	107.2%
3.2%	4.9%	6.4%	6.7%
-36	-62	-91	-120
-	-	-	-
-	-	-	-
-143	-302	-489	-860
-	-	-	-
-	-	-	-
1,629	5,167	9,982	13,565
360.2%	871.2%	-	699.4%
2.9%	4.6%	6.1%	6.2%
	FY06/23
Q1	Q2	Q3	Q4
1,175	3,437	4,315	3,774
-	-	-	366.5%
72.1%	97.1%	89.6%	105.3%
2.2%	6.4%	8.9%	7.5%
640	292	718	187
27.7%	147.5%	369.3%	-56.7%
39.3%	8.3%	14.9%	5.2%
27.7%	13.8%	18.3%	10.5%

FY06/24

Q1	Q1-Q2	Q1-Q3	Q1-Q4
4,390
273.6%
93.9%
7.9%
482
-24.7%
10.3%
23.3%
21
-
0.4%
13.0%
-5
-
-
-
4,889
170.4%
104.6%
8.5%
-25
-
-
-191
-
-
4,673
186.9%
8.1%
	FY06/24
Q1	Q2	Q3	Q4
4,390
273.6%
93.9%
7.9%
482
-24.7%

10.3%

23.3%

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IT business

YoY

% of total

Segment profit margin

Photocatalyst business

YoY

% of total

Segment profit margin

Reportable segments total

YoY

% of total

Segment profit margin

Other

YoY

% of total

Total

YoY

Operating profit margin

1	10	6	30
-	-	20.0%	-
0.1%	0.3%	0.1%	0.8%
0.6%	6.8%	4.2%	19.2%
-9	-14	-8	-9
-	-	-	-
-	-	-	-
-	-	-	-
1,808	3,724	5,031	3,983
278.2%	895.7%	-	224.1%
111.0%	105.3%	104.5%	111.2%
3.2%	6.6%	9.5%	7.6%
-36	-26	-29	-29
-	-	-	-
-	-	-	-
1,629	3,538	4,815	3,583
360.2%	-	-	267.9%
2.9%	6.3%	9.1%	6.8%

21

-

0.4%

13.0%

-5

-

-

-

4,889

170.4%

104.6%

8.5%

-25

-

-

4,673

186.9%

8.1%

Source: Shared Research based on company data

Any differences between figures in the table and those in company data are due to rounding

Q1 FY06/24 results

Revenue: JPY57.7bn (+3.6% YoY)

Operating profit: JPY4.7bn (+186.9% YoY)

OPM: 8.1% (2.9% in Q1 FY06/23)

Recurring profit: JPY4.5bn (+212.1% YoY)

Net income attributable to owners of the parent: JPY1.7bn (+227.1% YoY)

On a quarterly basis, revenue reached an all-time high and operating profit grew YoY. The Solar Panel Manufacturing business drove performance, and the Green Energy business promoted one-time revenue business and the ownership of solar power plants (recurring revenue business). Foreign exchange gains from VSUN overseas transactions boosted recurring profit. Going forward, the company aims to achieve its full-year earnings forecast through flexible management responses to market changes amid oversupply in the panel market and other uncertainties in the external environment.

Full-year forecast progress

The achievement rate versus the full-year forecast was 22.9% for revenue, 29.6% for operating profit, 28.5% for recurring profit, and 24.8% for net income attributable to owners of the parent. Overall, revenue was generally in line with the forecast, as each profit item made steady progress.

Results in key reportable segments

Solar Panel Manufacturing business

Revenue: JPY55.5bn (+4.2% YoY)

Segment profit: JPY4.4bn (+273.6% YoY)

Segment OPM: 7.9% (+2.2% in Q1 FY06/23)

Panel sales to the US were firm as the company secured profits by setting panel sales prices according to component prices and container freight rates, and improving production efficiency. Despite oversupply in the solar panel market, VSUN has numerous blue-chip customer contracts with terms longer than one year, minimizing impacts from the market.

Green Energy business

Revenue: JPY2.1bn (-10.5% YoY)

Segment profit: JPY482mn (-24.7% YoY)

Segment OPM: 23.3% (27.7% in Q1 FY06/23)

In addition to steadily promoting recurring revenue businesses, including the acquisition of the Toyoura Solar Power Plant in Shimonoseki, the company actively pursued non-FIT projects as a PPA operator, including commencing the exploration of joint projects with leading domestic companies.

Equity ratio

The equity ratio was 9.2%, nearly unchanged from 9.1% as of end-FY06/23, and despite accumulating retained earnings, VSUN capital expenditures led to an increase in borrowings. The company set a target equity ratio of above 10% to

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12%, and to ensure financial soundness, intends to strengthen its equity by increasing retained earnings, particularly in the Solar Panel Manufacturing and Green Energy businesses.

Capital investment plan

Subsidiary Vietnam Sunergy Cell Company Limited (hereinafter, "Cell Company") has been engaged in the construction of a cell plant that will have an overall capacity of 8GW per year (investment amount: approximately USD300mn), with Phase 1 of this project (4GW annual production capacity; investment amount: approximately USD180mn) completed in late October 2023. The company aims to stabilize parts procurement, vertically strengthen upstream supply chains, and respond flexibly to import regulations in each country, while also making efforts to gradually increase profit margins by reducing costs through the in-house production of key components. After the cell plant commences operations, the company anticipates an increase in revenue resulting from the future sale of cells to external parties. In Phase 2, the company will carefully consider investment execution, taking into account the future operational status of Phase 1 of the cell plant.

To ensure a competitive advantage in the US market going forward, VSUN is considering specific actions necessary for constructing a new solar panel plant in the US, including potential construction site selection and construction funding arrangements.

Fundraising

Cell Company is effectively seeking a listing on the US NASDAQ stock exchange through BLUE WORLD ACQUISITION CORPORATION (BWAQ), a special purpose acquisition company listed on the NASDAQ, and must receive approval from BWAQ shareholders and the US Securities and Exchange Commission (SEC) by February 2024, as well as comply with various laws and regulations in each country. According to the company, the listing is set for no later than February 2024.

Full-year company forecast
Full-year company forecast
					FY06/22					FY06/23
(JPYmn)			1H results	2H results	FY results		1H results		2H results	FY results
Revenue			26,655	65,780	92,435		112,071		105,344	217,415
	YoY			130.3%	329.2%	243.6%		320.5%		60.1%	135.2%
	Operating profit			532	1,165	1,697		5,167		8,398	13,565
	YoY			-37.1%	125.9%	24.7%		871.2%		620.9%	699.4%
	Operating profit margin			2.0%	1.8%	1.8%		4.6%		8.0%	6.2%
	Recurring profit			340	1,170	1,510		5,860		8,939	14,799
	YoY			-61.4%	201.9%	19.0%		1623.5%		664.0%	880.1%
	Recurring profit margin			1.3%	1.8%	1.6%		5.2%		8.5%	6.8%
Net income attributable to owners of the			803	64	867		2,269	3,176	5,445
parent
	YoY			130.3%	-66.0%	61.5%		182.6%		-	528.0%
	Net margin			3.0%	0.1%	0.9%		2.0%		3.0%	2.5%

Source: Shared Research based on company data

Any differences between figures in the table and those in company data are due to rounding

FY06/24

FY forecast

251,800

15.8%

15,800

16.5%

6.3%

15,800

6.8%

6.3%

7,000

28.6%

2.8%

The company's FY06/24 forecast calls for revenue of JPY251.8bn (+15.8% YoY), operating profit of JPY15.8bn (+16.5% YoY), recurring profit of JPY15.8bn (+6.8% YoY), and net income attributable to owners of the parent of JPY7.0bn (+28.6% YoY).

As the fourth solar panel factory and the cell plant are in operation, the company aims to increase sales by expanding the sales destinations of solar panels to the United States, Europe, and other regions. In terms of profit, the company aims to secure stable earnings by producing cells in-house (procured externally up to now), setting panel sales prices according to component prices and container freight rates, and improving production efficiency. The company will continue to make its own solar power plants and advance power plant development.

Medium-term management plan

Medium-term management plan

In September 2023, Abalance formulated a new medium-term management plan covering three years from FY06/24 to FY06/26. The company aims to become a global core renewable energy company by 2030, focusing on building the Solar

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Panel Manufacturing and Green Energy businesses as growth engines to achieve sustainable growth and maximize corporate value. This medium term management plan is positioned as an acceleration period to realize this goal.

Resetting business targets for core businesses by 2030

The company reset its business targets for 2030 in conjunction with the formulation of a new medium-term management plan. The previous business targets were 1GW of output capacity for domestic and overseas proprietary power plants in the Green Energy business, 8GW of annual solar panel manufacturing capacity and 6GW of annual cell production capacity in the Solar Panel Manufacturing business. The company maintained the 1GW of output capacity for power plants in Japan and overseas, but raised the annual production targets for solar panels and cells to 12GW and 16GW, respectively. Additionally, the company started production of wafers and ingots, with an annual production capacity of 8GW.

To realize medium- to long-term enhancement of corporate value, the company will practice corporate management with an awareness of ROIC and cost of capital as management controls (KPIs), and aims to achieve fiscal year targets with operating profit as the KPI. Further, from the perspective of sound corporate growth, the company will strive to increase the equity ratio.

Annual production capacity	FY06/23	FY06/26	FY06/31
GW	Results	Company forecast	Company forecast
Solar panel	5	10	12
Solar cell	0 (See note)	10	16
Wafer and ingot	0	4	8

Source: Shared Research based on company materials

Note: The construction of the cell plant with a 4GW capacity was completed in late October 2023.

New medium-term management plan numerical targets

The target value for FY06/24 is unchanged, but for FY06/25 and FY06/26, the company expects revenue and all profit items including operating profit to increase, and OPM and equity ratio to rise. For FY06/26, the final year of the plan, the company forecasts revenue of JPY355.8bn, operating profit of JPY30.8bn, and OPM of 8.7%. CAGR during the plan period is 17.8% for revenue, 31.4% for operating profit, and 27.7% for recurring profit. During the plan period, revenue will increase by around JPY50.0bn each fiscal year, with operating profit doubling from JPY15.8bn in FY06/24, to JPY30.8bn in FY06/26.

Medium-term	management	plan (September	2023)
	FY06/23	FY06/24 (Company forecast)	FY06/25 (Company forecast)	FY06/26 (Company forecast)
(JPYmn)	Results		YoY	YoY change	% of total		YoY	YoY change	% of total		YoY	YoY change	% of total
Revenue	217,415	251,800	15.8%	34,385	100.0%	301,800	19.9%	50,000	100.0%	355,800	17.9%	54,000	100.0%
Solar Panel Manufacturing	206,811	239,000	15.6%	32,189	94.9%	287,000	20.1%	48,000	95.1%	338,000	17.8%	51,000	95.0%
business
Green Energy business(one-	7,420	7,800	5.1%	380	3.1%	8,800	12.8%	1,000	2.9%	9,800	11.4%	1,000	2.8%
time)
Green Energy	3,190	5,000	56.7%	1,810	2.0%	6,000	20.0%	1,000	2.0%	8,000	33.3%	2,000	2.2%
business(recurring)
Operating profit	13,565	15,800	16.5%	2,235	6.3%	25,800	63.3%	10,000	8.5%	30,800	19.4%	5,000	8.7%
Recurring profit	14,799	15,800	6.8%	1,001	6.3%	25,800	63.3%	10,000	8.5%	30,800	19.4%	5,000	8.7%
Net income attributable to owners	5,445	7,000	28.6%	1,555	2.8%	-	-	-	-	-	-	-	-
of the parent
Equity ratio	9.1%									20.0%

CAGR

17.8%

17.8%

9.7%

35.9%

31.4%

27.7%

-

-

Source: Shared Research based on company data.

Note: The one-time revenue business in the Green Energy business includes the sale of power plants, sales of goods (panels, storage batteries, etc.), reuse and recycling business, and energy-saving business, all conducted by domestic group companies. The recurring revenue business includes revenue from the sale of electricity from solar and wind power plants, stable revenue from operation and maintenance (O&M), and other revenue streams that form the source of cash flow.

Note: The unit price of solar panels is at risk of falling below the planned value if there is a global decline in panel prices, which would cause a drop in sales prices.

Note: The assumed exchange rate is JPY130-JPY135/USD.

Note: The fourth solar panel plant is expected to gradually improve its utilization rate in line with the progress of in-house production of cells, which are key components.

Note: As for the impact of additional tariff measures on solar power generation products (cells and panels) in the US, the company has not factored it in at this point in time as the company has not been designated as subject companies, and it is difficult to foresee sufficiently.

The company also published the planned figures for VSUN, which are the basis for its forecasts. It expects revenue to increase in line with expanded panel manufacturing capacity, which is expected to drive revenue higher in the US, European, and other markets. Operating profit is expected to increase from JPY12.7bn in FY06/23 to JPY29.8bn in FY06/26. CAGR for revenue and operating profit during the plan period is 17.8% and 32.9%, respectively. OPM is expected to rise from 6.1% in FY06/23 to 8.8% in FY06/26. The increase in operating profit is expected to be driven by higher revenue, lower parts procurement costs, cost reductions in line with cell plant completion, and improvements in utilization rates leading to lower costs.

The company plans to expand its annual manufacturing capacity for solar panels and cells to 10GW each by FY06/26, with 4GW planned for the start of wafer and ingot production. The company intends to increase capital expenditure from

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