Event: October 31, 2023, the company released its report for the third quarter of 2023. In the first three quarters, the company achieved total operating income of 42,620 billion yuan, a year-on-year increase of 21.70%; realized net profit of 2,991 billion yuan, a year-on-year decrease of 6.33%; realized net profit of 2,981 billion yuan, a year-on-year increase of 10.53% over the previous year (changes in the fair value of the company's shares of China Control Technology held affected the company's current net profit of -106 million yuan. Net profit attributable to shareholders of listed companies after excluding the influence of this factor was 3,097 billion yuan, a decrease of 4.59% year on year. (Non-profit and loss fluctuations were mainly due to the divestment of the photovoltaic module business in July '22, which had an impact of 382 million yuan). Looking at a single quarter, the company achieved revenue of 14.769 billion yuan in 23Q3, an increase of 29.53% over the previous year; realized net profit of 1,088 billion yuan, a decrease of 28.40% over the previous year; and realized net profit of 1,139 billion yuan after deducting non-return to the mother, an increase of 6.64% over the previous year.
Profitability continues to improve, and we continue to reduce costs and increase efficiency. In terms of profitability, the company's 23Q3 gross margin was 23.96%, up 0.32Pct month-on-month; net profit margin was 9.95%, up 1.93Pcts month-on-month. In terms of cost control, the company's cost control is effective, and the cost rate continues to decline. The fee rate for the first three quarters of 2023 was 11.31%, a year-on-year decrease of 1.54 Pcts. Among them, the sales/management expense ratio was 3.95%/3.35%, respectively, a year-on-year decrease of 0.51/0.11Pct.
The household business continues to expand, and the installed capacity of photovoltaic power plants is being released. In 23H1, Zhengtaian Energy achieved revenue of 13.705 billion yuan, net profit exceeding 1,202 billion yuan, development and grid-connected capacity exceeding 5.3 GW, and power plant sales revenue of over 10 billion yuan to central enterprises, injecting strong impetus into sustainable business development. The company actively implements the dual carbon goal, continues to be deeply involved in the smart power energy efficiency and new energy industry, and the new energy business has maintained a steady development trend. As of September 30, 2023, the company has an installed capacity of 14,848.88MW of photovoltaic power plants, of which the installed capacity of household photovoltaic power plants is 12,492.40 MW, a significant increase over the same period last year.
Low pressure optimizes channel layout and deepens implementation of global manufacturing capacity layout. The 23H1 smart appliances sector achieved revenue of 11.475 billion yuan, an increase of 7% over the previous year. In terms of channels, core distributors with customer resources and financial strength were selected and developed into regional distributors. 1,600 distributors were newly developed, and the coverage rate of local and municipal channels increased from 81% to 85%. In terms of market development, using the “Zhengtai+Noak” dual brand product strategy, we are deeply cultivating the “new specialty” market, focusing on high-value-added projects, and developing new leading customers in industries such as Corstar, Sunshine Power, and Shangneng Electric, bringing about business growth. In terms of international business, it achieved revenue of 2,319 billion yuan, an increase of 29.14% over the previous year. Zhengtai International continues to promote the construction of regional headquarters, prepare 4 overseas factories, deepen the Singapore Operation Management Center, and complete the overall construction of Europe/West Asia and Africa.
Investment suggestions: We expect the company's revenue for 2023-2025 to be 552.72, 657.59, and 75.995 billion yuan respectively, with corresponding growth rates of 20.2%, 19%, and 15.6% respectively; net profit of 44.54, 53.43, and 6.336 billion yuan respectively, corresponding growth rates of 10.7%, 20.0% and 18.6% respectively, using the closing price on November 1 as a benchmark, corresponding to 2023-2025 PE of 11X, 9X, and 8X. Maintain a “Recommended” rating.
Risk warning: risk of fluctuations in raw material prices; risk of exchange rate changes.