3Q23 performance is lower than market expectations.
The company announced 3Q23 results: revenue of 1.365 billion yuan, a drop of 44.0% / 27.4%, a net profit of 23 million yuan, and a drop of 88.3% / 66.1%. The company's performance fell short of market expectations due to the lack of expectations of 3Q23 European household savings and terminal price reduction.
Trend of development
3Q23 European household savings is not as expected, superimposed lithium carbonate prices fell, energy storage business continued to be under pressure.
Due to the summer holiday in Europe, the slow removal of household savings, and the slow pace of delivery of 3Q23 due to the low demeanor of downstream investment and the falling price of lithium carbonate, the delivery pace of the company's energy storage business 3Q continues to be under pressure. we estimate that the company's energy storage shipments have declined month-on-month, superimposed terminal price reduction, we estimate that 3Q energy storage business revenue of 400 million to 500 million yuan, month-on-month decline or up to 50-60%. In terms of gross margin, affected by price reduction and low capacity utilization, we estimate that gross margin has also declined from the previous month. Looking forward, we expect that the European household storage will still have nearly 3-6 months of inventory, which may last until 1Q24, while the large storage may meet the requirements of the downstream grid-connected nodes, 4Q may usher in rush installation, on the whole, we expect the company's 4Q energy storage shipments to pick up somewhat.
Consumer business continues to pick up, and power business is still under pressure under the influence of downstream customers going to the warehouse. We estimate that 3Q's consumer business revenue is close to 800 million yuan, an increase of 20% month-on-month, and continues to show a pick-up trend; power business is still in the doldrums due to the impact of Wuling, a big customer, but the company is actively breaking the situation and opening up new customers. we expect the power business to be repaired in 2024.
The comprehensive gross profit margin increased month-on-month, the cost investment increased, and the impairment of assets dragged down the current profit performance. Company 3Q23 comprehensive gross profit margin 17.73%, month-on-month increase of about 0.4ppt, mainly due to the optimization of sales structure, the proportion of consumer business increased; 3Q company increased investment, sales / management / finance / R & D expense rate month-on-month change + 3.1pptshock "1.9pptshock" 1.5pptshock 0.4ppt; at the same time, the company set aside 55.86 million yuan in asset impairment, which we estimate is mainly from inventory impairment. 3Q high cost input + asset impairment provision is a further drag on the current performance.
Profit forecast and valuation
Due to the fact that the European household savings fell short of expectations and the terminal continued to reduce the price, we lowered the profit forecast of 2023 23.5x/25.6x by 35% to RMB 352 million in 2024 to RMB 686 million. At the same time, we took into account the adjustment of the profit forecast and remained optimistic about the subsequent growth of the energy storage industry, lowering the target price by 22.2% to 35 yuan. The current stock price and target price correspond to 2024 23.5x/25.6x Pmax E, with 9.1% upside space to maintain the industry rating.
Risk
Global demand for energy storage is lower than expected, sales of new energy vehicles in China are lower than expected, raw material prices fluctuate sharply, and profits decline as a result of intensified market competition.