The company's annual report was in line with market expectations, and the quarterly report fell short of expectations. In 2022, the company's revenue was 3.203 billion yuan, up 38.35% year on year; net profit of 287 million yuan, up 2.64% year on year; net profit of 271 million yuan, up 0.46% year on year; gross margin in '22 was 44.32%, down 3.03 pct year on year; net interest rate was 8.95%, down 3.11 pct year on year, in line with market expectations. The Q1 company achieved revenue of 448 million yuan in '23, a decrease of 26.77% over the previous year; net profit of the mother was 0.3 billion yuan, a decrease of 140.45% from the previous year, after deducting net profit of -46 million yuan, a decrease of 163.24% from the previous year, and the gross profit margin was 41.69%, lower than market expectations.

Q1 Demand growth slowed, and revenue declined year over year. Q1 achieved revenue of 450 million yuan, down 27% from the same period, lower than expected. This was due to sluggish overseas consumption and the slowdown in demand growth and aggressive sales methods. It is expected that demand will gradually recover in Q2, with revenue increasing by 30%. The annual revenue is expected to be 4 billion yuan+, an increase of 30% +.

The company's Q1 revenue was 90 million yuan, accounting for 21%, +0.6pct over the previous year, adding 4 independent websites for global brands in Australia/France/Italy/Spain, with a total of 12 sites; 150 million offline channels, accounting for 33%, +12pct compared to the previous year. The proportion of offline and official websites is expected to continue to increase thereafter, further enhancing the company's profitability.

Aggressive sales methods combined with expenses increased significantly, and profitability declined year-on-year. Q1 The company's gross profit margin was 42%, -6.7/+0.7pct compared to the same month, net profit margin -6.6%, 19/-10pct compared to the same period. The company lowered the prices of some products, and the company promoted brand building, and marketing expenses increased significantly. Q1 sales/management/R&D expenses were 1.6/0.5/40 million, an increase of 23%/127%/90%. The corresponding cost rate was 36%/12%/9% year on year, +15/8/6pct, respectively. Q2 gross margin is expected to remain stable as raw material prices fall and inventories are gradually cleared.

Expense rates have increased dramatically, and operating cash flow has declined year over year. The cost for the 23Q1 period was 240 million yuan, +26%/-37% over the same period, and the cost rate for the period was 54%, +22pct/14pct compared to the same period. At the end of Q1, the company had an inventory of 930 million, up 10% from the beginning of the year; net cash flow from operating activities in 23Q1 was -170 million, down 77% from the same period, and cash flow from investment activity was 1.6 billion, down 6381% from the same period. Cash on the books was $4,422 million, down 29% from the beginning of the year, and short-term loans amounted to $223 million, up 34% from the beginning of the year.

Profit forecast and investment rating: Considering the slowdown in industry demand growth, we lowered the company's net profit to 218/4.50/777 million in 2023-2025 (the original forecast for 23-24 was 703/1,039 million yuan), compared to -24%/+106%/+73%, corresponding PE was 47/23/13 times, considering the large space in the energy storage market and the company's profitability is expected to increase steadily in the future, maintaining the “buy” rating.

Risk warning: Increased competition in the industry, demand falling short of expectations, etc.