Event: On October 26, 2023, the company released its three-quarter report for 2023. The first three quarters of 2023 achieved revenue of 5.502 billion yuan, +51.04% year-on-year; realized net profit of 445 million yuan, +54.39% year-on-year; achieved net profit of 421 million yuan, +56.84% year-on-year. 2023Q3 achieved revenue of 2.105 billion yuan in a single quarter, +47.25% year-on-year and +10.43% month-on-month; net profit of 123 million yuan, +0.96% year-on-year and -30.74% month-on-month.
The ability to control three fees is strong, and Q3 impairment is dragging down the company's performance. The company's sales expense ratio, management expense ratio, and financial expense ratio for the first three quarters of 2023 were 7.93%, 3.12%, and 0.95%, respectively. The total three-fee rate was 12%, year-on-year -3.42pct; the company's gross profit margin and net profit margin were 29.01% and 8.27%, respectively, -1.57 pct and +0.01pct, respectively. In Q3, the company's net interest rate for the single quarter was 5.98%, -2.97pct year-on-year and -3.54pct, mainly due to the company's Q3 calculation of asset impairment losses of 43 million yuan and credit impairment losses of 11 million yuan, which greatly dragged down the company's net profit level.
Downstream demand for installed capacity is strong, and the energy storage business is developing rapidly. Domestic demand for large storage and industrial and commercial energy storage is expanding at an accelerated pace. The company's energy storage PCS and energy storage systems lead the market share in the industry, fully benefiting from increased industry demand and achieved shipment volume. According to CNESA data, the company ranked second in global energy storage PCS shipments in 2022, and domestic user-side energy storage system shipments ranked first, highlighting its leading position in the industry. In the first three quarters of 2023, the company's new energy business achieved revenue of 2,695 billion yuan, including photovoltaic revenue of nearly 700 million yuan and energy storage revenue of nearly 2 billion yuan; Q3 energy storage revenue for the single quarter was about 900 million yuan, a significant increase over the previous month. The company has added enough new orders, and is expected to maintain its revenue growth trend in Q4. In terms of globalization, the company is actively developing overseas markets. The Malaysian plant is expected to be put into use by the end of this year to help the development of overseas household storage and industrial and commercial energy storage, and is expected to become a new growth point for the company's energy storage business. In terms of profitability, the current competition in the energy storage market industry is fierce. The company's supply chain management continues to be optimized, the ability to withstand cost pressure is strong, and the profit level remains stable. The gross margin of the company's new energy business in the first three quarters was 25.48%, a slight increase from the first half of the year.
Increase investment in computing power and seize new opportunities for IDC development. The company's data center business layout is far-reaching, and the results are remarkable. As of 2023H1, the company has 9 major data centers in North, Shanghai, Guangzhou, etc., with more than 30,000 self-owned cabinets; it operates more than 20 data centers in more than 10 cities across the country. The main customers include the three major operators, large Internet companies such as Tencent, major financial institutions, and government agencies. The company has seized the wave of computing power development and vigorously promoted the construction of computing power infrastructure. As of 2023H1, the company is actively cooperating with companies such as Tencent, Suiyuan Technology, Mu Xi, and Yizhu Technology to launch various computing power industry solutions such as AI bare metal leasing, GPU computing power pools, elastic computing power on the cloud, and AI computing power service platforms. At the same time, as a pioneer in the field of liquid cooling, the company empowers the continuous upgrading of computing power with liquid cooling. In the first three quarters of 2023, the company's data center segment achieved revenue of 1.97 billion yuan, and Q3 achieved revenue of about 680 million yuan in a single quarter, a slight decrease from the previous month. It is expected that quarterly revenue will be adversely affected due to reasons such as the company's low cabinet listing rate.
With the implementation of the company's AI computing power deployment and the increase in orders for various products, Q4 revenue is expected to pick up.
Smart electricity is steadily gaining ground, and the position of AI energy management leader is stable. The company has been deeply involved in the field of energy management for more than ten years, and the smart power business performance is steady. Products and system services mainly include UPS power supplies, EPS power supplies, high voltage DC power supplies, nuclear grade UPS power supplies, power supply supporting products and system solution services. According to the FORWARD report, the company's high-end power supply (UPS) ranked first in China's market share in 2022. In the AI era, the company focuses on the application of AI smart power, and uses various new technologies such as artificial intelligence, the Internet of Things, mobile interconnection, cloud computing, and big data to create AI energy management solutions. It has mature vertical models in the fields of airports, data centers, photovoltaic energy storage, chemical electronics, etc., and is optimistic that diversified downstream demand will drive the company's business scale expansion. In the first three quarters of 2023, the company's smart power business achieved revenue of 830 million yuan, with a gross margin of 34.8%.
Investment suggestions: The company is expected to achieve operating income of 8.316 billion yuan, 11.237 billion yuan and 14.889 billion yuan respectively in 2023-2025, and net profit of 685 million yuan, 911 million yuan and 1,203 billion yuan, respectively, with a year-on-year increase of 175.7%, 33.0% and 32.1%. The corresponding EPS is 1.48, 1.97, and 2.61, respectively, and the PE corresponding to the current stock price is 18.9X, 14.2X, and 10.7X, respectively. It was covered for the first time, and a “increase in holdings” rating was given.
Risk warning: energy storage demand falls short of expectations; overseas promotion falls short of expectations; IDC demand falls short of expectations; industry competition intensifies, etc.