Events: The company released its three-quarter report for 2023. In Q3, the company achieved operating income of 212 million yuan, -5.45%; net profit of 77 million yuan, -4.87%; net profit after deduction of 75 million yuan, -6.34% year-on-year. In 2023, Q1-3 achieved a total operating income of 544 million yuan, +4.83% year-on-year; net profit of 186 million yuan, +15.49% of the same period; net profit after deduction of 179 million yuan, +11.3% year-on-year.
Key points of investment:
Q3 PV power generation revenue declined slightly, and the overall scale of power plants continued to expand. According to the company announcement, the slight year-on-year decline in 23Q3's revenue was mainly due to a decrease in photovoltaic power generation revenue. The specific reasons were (1) rainy and typhoon weather, which reduced the number of hours equivalent to photovoltaic power generation, reducing unit power generation; (2) 23Q3 comprehensive electricity revenue fell 0.02 yuan/W year-on-year. This is due to a corresponding decrease in the share of profit and loss in power trading and the price of PV electricity. We believe that the slight fluctuation in the company's revenue in this quarter is a normal phenomenon due to seasonal factors. Due to the steady expansion of the company's own power plants, 23Q1-3's photovoltaic power generation revenue and gross profit continued to grow year-on-year, and it is expected that the business will continue to develop steadily in the future.
Profitability remains stable, and there is still room for financial expenses to decline. In 23Q3, the company's overall gross margin and net profit margin were 61.67%/36.14% respectively, with year-on-year changes of -0.96/+0.22pct, respectively, and profitability remained stable. In terms of cost control, the sales/management/R&D/finance expense ratio of 23Q3 companies was 0.35%/7.72%/3.34%/8.06% respectively, with year-on-year changes of +0.09/+0.32/-1.11/-0.10pct, which is basically the same as the same period in '22. Judging from the absolute value of expenses, financial expenses account for nearly half of the company's total period expenses. The main component is loan interest for the company's power plant projects. Considering that the company can simultaneously lower loan interest rates through low-interest replacement, etc., and that future loans for photovoltaic power plant projects will expire one after another, the company is expected to further reduce the financial expense ratio, thereby improving overall profitability.
The distributed photovoltaic business is growing steadily, driven by industrial and commercial energy storage+household storage. In recent years, the company has continued to expand the scale of its self-owned distributed power plant business with high gross margin, thereby increasing the revenue and profit of the company's power generation business. On October 24, the company issued the “Prospectus for Issuing Convertible Corporate Bonds to Unspecified Targets”, which plans to raise 880 million yuan for distributed photovoltaic power plant construction projects and bank loan repayment, of which a total investment of 723 million yuan is planned for distributed photovoltaic power plant construction projects. According to the announcement, the construction period of the project is about 1 year, and the total installed capacity after completion is about 166.26MW. Considering that up to H1 in '23, the installed capacity of the company's photovoltaic power plants was about 782.21MW, it is expected that the commissioning of this project will effectively increase the company's power plant business profits. Furthermore, the company is steadily promoting industrial and commercial energy storage operations, continuously expanding new distributed business models, and at the same time relying on its original business experience to accelerate the layout of household storage products, thus seeking new profit growth points. Considering that the company has solid technical reserves, rich distributed customer resources, deep understanding of market needs, and strong domestic and overseas channel building capabilities, it is expected that the energy storage business will become a new profit growth point for the company.
Profit forecast: The company is a scarce pure distributed photovoltaic operator. The installed capacity continues to grow, and it simultaneously uses customer and technical advantages to develop energy storage business. Considering that the company's photovoltaic power generation revenue has declined slightly since 23 years, which has a certain impact on performance, we lowered the company's net profit from 2023-2025 to 2.39, 3.09, and 381 million yuan (previous values were 2.86, 3.36, and 423 million yuan), corresponding to PE by 26, 20, and 16 times, respectively, and slightly lowered the company's valuation to 30 times PE in 2023 (previous value 35 times), with a target price of 14.40 yuan, maintaining the “buy” rating.
Risk warning: the risk that the project will not proceed as expected; the risk that the sales of energy storage products will fall short of expectations; there is a risk that the public information used in the research report may not be updated in a timely manner or that the information is not updated in a timely manner.