Description of the event

Hemai Co., Ltd. released its semi-annual report for 2023. 2023H1 achieved revenue of 1.06 billion yuan, up 107% year on year; net profit of 350 million yuan, up 73% year on year; of these, 2023Q2 achieved revenue of 480 million yuan, up 70% year on year, down 16% month on month; net profit of 170 million yuan, up 50% year on year and 2% month on month.

Incident comments

In the micro inverse and DTU business, the company achieved revenue of 800 million yuan in 2023H1, about double the previous year. Microreverse sales volume was 890,000 units, and DTU was about 100,000 units. Among them, in Q2, we expect a decline in micro-inverse compared to Q1. The reason is that the European and American markets have certain channel inventory, and order demand has weakened. We expect 2023H1 slight inverse gross margin to be relatively stable. Considering the decline in the expense ratio, the net profit performance of a single unit in Q2 will be better.

In other businesses, revenue from the 2023Q2 large storage and distributed power generation business is expected to increase significantly, contributing to a certain increase in profit. Household storage is affected by European demand, and the performance is relatively stable; the development of complete electrical equipment is relatively stable. Due to the increase in the share of revenue from the low gross margin business mentioned above, the company's overall gross margin decreased compared to Q1.

In terms of other data, the 2023Q2 company's expenses rate for the period was 5.1%, down 11 pct from month to month. The main reason was that Q2 had a lot of exchange earnings, which led the company's financial expenses rate to -18.1%. 2023H1 continued to increase R&D investment, with 90 million R&D investment, 205% increase, 302 R&D personnel, 94% increase. At the end of 2023Q2, the company had an inventory of 82 million dollars, which was relatively stable.

Looking ahead, we expect the company to maintain a high increase in slightly negative shipments throughout the year, with Q3 expected to increase significantly month-on-month. Recently, in the context of inventory removal, we expect that the company's slightly negative orders have improved month-on-month, and subsequent channel inventory removal is expected to be completed. The large storage business is also expected to continue to contribute to increased revenue and profit.

We expect the company to achieve profits of 901.3 billion dollars in 2023-2024, corresponding to 25 and 17 times PE, and maintain the purchase rating.

Risk warning

1. The competitive pattern deteriorated;

2. PV installation falls short of expectations.