Events: In the first three quarters of 2023, the company achieved operating income of 997 million yuan, an increase of 38.67% over the previous year; realized net profit of 119 million yuan, an increase of 39.32% over the previous year; and achieved net profit of 111 million yuan, an increase of 65.54% over the previous year. 2023Q3 achieved operating income of 358 million yuan in a single quarter, an increase of 54.40% over the previous year; realized net profit of 41 million yuan, an increase of 72.94% over the previous year; and realized net profit after deducting non-return mother of 38 million yuan, an increase of 93.55% over the previous year. The company's 2023Q3 performance exceeded expectations.

Benefiting from the explosion of wind power and photovoltaic installations, revenue growth has been maintained at a high level. In the first three quarters of 2023, the increase in the company's performance was mainly due to an increase in sales revenue for motor drives (inverters) and power quality monitoring and control (SVG) compared to the same period last year. Revenue growth accelerated in 2023Q3, mainly due to SVG benefiting from the explosion of demand for downstream wind power and photovoltaic installations. Sales revenue increased over the same period last year: in the first three quarters of 2023, 128.94GW of domestic photovoltaic installations were added, up 145.09% year on year; of these, centralized photovoltaic installations were 61.80GW, up 257.85% year on year; wind power installations were added 33.48 GW, up 74.01% year on year.

Gross margin remained at a high level, and the expense ratio increased. In 2023Q3, the company's comprehensive gross profit margin was 29.02%, up 0.41pp from the previous year and down 0.44pp from the previous year. The overall gross margin remained at a high level. The company's PCS export strategy has made real progress. The PCS energy storage product has obtained the type test report of the Chinese Academy of Electrical Sciences. In March, the first self-developed energy storage PCS product was connected to the grid and put into operation at Guigang, Guangxi. The high-voltage SVG product completed the design of cost-reduction iterative models for high-power and low-power models, respectively. Profitability is expected to continue to improve in the future.

There was a slight increase in 2023Q3 company expenses month-on-month. Due to seasonal factors, 2023Q3 revenue declined month-on-month compared to 2023Q2. The 2023Q3 period fee rate was 18.50%, an increase of 3.71 pp over 2023Q2.

There are plenty of orders in hand, and executives have increased their holdings to show confidence. As of the end of 2023Q3, the company's contract debt was 154 million yuan, up 45.88% from the beginning of the year and 30.35% from the end of 630. The company's inventory was about 537 million yuan, up 42.02% from the beginning of the year and 34.62% from the end of 630. The sharp increase in inventories was mainly due to the preparation of raw materials and the issuance of goods. The company currently has sufficient orders, and production and sales are booming. As inventory gradually carry-over confirms revenue, it is expected that the trend of high performance growth will continue. Recently, based on firm confidence in the company's development and recognition of the company's long-term investment value, company directors and executives have increased their holdings of the company's shares by 80,600 shares, accounting for 0.0576% of the company's total shares. The bottom of the company's senior management increased their holdings, demonstrating their confidence in the company's medium- to long-term development.

Profit forecasts and investment advice. The company's 23Q3 revenue and profitability exceeded market expectations. Currently, the company has sufficient orders, and production and sales are booming. As the PCS export strategy progresses, new SVG products reduce costs and iteratively, and profitability is expected to continue to increase. The company's net profit from 23 to 25 is estimated to be 2.0 million yuan, 280 million yuan, and 3.4 billion yuan respectively, corresponding to PE 19, 14, and 11 times, respectively, maintaining the “buy” rating.

Risk warning: Order growth may fall short of expectations, risk of rising raw material prices, and increased risk of industry competition.