The 2022 performance was slightly lower than our expectations. The 1Q23 performance exceeded our expectations of the company's revenue in 2022 of 45.974 billion yuan, +18.3% year on year; net profit of the mother after deducting the influence of central control was 3,993 billion yuan, +0.66% year on year. Due to pressure on low-pressure earnings, it was slightly lower than our expectations. 1Q23 The company's revenue was 15.741 billion yuan, +47.9% year on year, +43.7% month on month, net profit of 1.02 billion yuan, +104.7% year on year, +48.7% month on month, after deducting Central Control's net profit of 1,138 million yuan, +48.85% year-on-year, exceeding our expectations. We believe it was mainly due to low pressure profit recovery and the contribution of household asset transactions. By sector: According to the annual report, 2022:1) Low-voltage electrical appliance revenue was 19.528 billion yuan, -0.6% year on year, gross profit margin 27.1%, -1.8ppt year on year; 2) New energy revenue was 25.651 billion yuan, +40.96% year on year, gross profit margin 19.7%, +0.1ppt year on year. According to the company's performance meeting, in 2022, Zhengtaian was able to develop 7.54 GW of household photovoltaic installations, +58.7% year on year, achieving revenue/profit of 13.7 billion yuan/1,759 billion yuan, +143%/128%, respectively; 1Q23, Zhengtaian was able to add 2.2 GW of installed capacity, +165% over the same period last year, achieving revenue/profit of 8.756 million yuan/776 million yuan, +453%/184% year on year, respectively.
Development trends
Profits for low-voltage appliances were gradually restored quarterly, and direct sales of Noyak and overseas businesses grew rapidly. According to the company's performance meeting, 1Q23's low-pressure revenue was 6.424 billion yuan, +11.3% year on year, and net profit was 551 million yuan, -10% year on year. We estimated the 1Q23 low pressure net interest rate of 8.6%, -2.1ppt over the previous year, but it increased 1.5ppt over the full year of 2021. Quarterly profit showed a recovery trend. The 1Q23 industry also raised prices, reflecting demand-side recovery. According to the company's performance meeting, Noyak, a subsidiary for industry customers, had revenue of 1,718 billion yuan in '22, +68% year on year, and 1Q23 revenue +31% year on year; low voltage overseas revenue in '22 was 3.765 billion yuan, +47% year on year, and 1Q23 +21% year on year. Direct sales and overseas continued to contribute to high growth.
In '22, the household photovoltaic business had a 30% share, and the contribution of asset-light power plant transactions increased. In '22, the company added 7.54 GW of household photovoltaics installed, a 30% domestic share, an increase of 8ppt over the previous year. 1Q23 added 2.2 GW of installed capacity, +165% over the same period last year. Household asset transactions went smoothly. The 4Q22 and 1Q23 companies sold approximately 2.1/2.64 GW, which made a significant contribution to operating cash flow and profit. The company's 4Q22 operating cash flow was 7.77 billion yuan, driving the annual operating cash flow to 5.1 billion yuan. With the gradual decline in module prices, the company expects to add 40 GW of household photovoltaics installed in the domestic industry in 2023, the company will develop an additional 12-15 GW of installed capacity, and maintain stable self-owned installations. The contribution of the asset-light model will further increase.
Profit forecasting and valuation
Since the profits of low-voltage appliances were under pressure in '22, there may be a gradual recovery in '23. We lowered our 2023 net profit forecast by 8.7% to 5.167 billion yuan, and introduced 2024 net profit of 5.949 billion yuan to maintain the industry rating. Considering the increase in the profit share of the PV business with relatively high valuations, we maintained a target price of 41 yuan, corresponding to 17.1/14.8 times P/E in 2023/2024. There is room for 47.9% increase from the current stock price. The current stock price corresponds to 11.5/10 times P/E of 2023/2024.
risks
Macroeconomic recovery fell short of expectations, and PV module prices fell short of expectations.