The company achieved revenue of 1,390 billion yuan (-19.4% YoY) and net profit of 124 million yuan (-59.3% YoY) in 23Q3. Performance fell short of expectations, mainly due to a further decline in inverter shipments due to heavy inventory pressure in European and other markets, as well as exchange losses and increased equity incentive costs. The removal of overseas inverter inventories since 23Q4 is expected to come to an end, and company orders and shipments may improve steadily. We lowered the company's 2023-25 EPS forecast to 2.45/3.73/5.08 yuan, gave a target price of 75 yuan (based on 20 times PE in 2024), and maintained the “buy” rating.
Performance fell short of expectations, and gross margin was gradually under pressure. In 2023Q1-3, the company achieved revenue of 4.641 billion yuan (+11.39% YoY), net profit of 752 million yuan (+6.8% YoY), net profit of 772 million yuan (+8.2% YoY), gross profit margin of 35.8% (+2.2pcts YoY); of these, 23Q3 achieved revenue of 1,390 billion yuan (-19.4% YoY, -13.0% QoQ), net profit of 124 million yuan (-59.3% YoY, -59.1% QoQ), deducted from the mother Net profit was 125 million yuan (-63.8% YoY, -62.7% QoQ), and the comprehensive gross profit margin was 33.7% (-3.1pcts YoY, -3.1pcts QoQ).
High overseas inventories have dragged down inverter shipments, and the cost rate has risen. The company's Q3 performance fell short of expectations, mainly due to high overseas inverter inventories, which dragged down the company's shipping pace, reduced cost rate dilution effects, and increased exchange losses and equity incentive costs. Specifically: (1) The sales and management expense ratio increased markedly: 23Q3 companies' sales/management expenses were $0.87 billion, accounting for 6.3% (+0.1pcts QoQ)/7.2% (+2.9pcts QoQ) of revenue; among them, the increase in management expenses was mainly due to 23Q3 companies implementing equity incentive plans and accruing equity incentive expenses. (2) Contrary to the trend and accelerate product reserves: 23Q3, the company spent 79 million yuan (+6.8% QoQ) on R&D. In the field of inverters, the company continues to promote product research and development of grid-connected inverters and energy storage inverters. At the same time, in terms of power plant operation, it already has one-stop solution capabilities through specialized management of various business links. (3) Exchange losses: 23Q3 The company's financial expenses were 87 million yuan (an increase of 111 million yuan over the previous month), mainly due to large exchange losses caused by the depreciation of the euro and exchange rate fluctuations.
Overseas household storage is being removed at an accelerated pace, and profit is expected to improve in 23Q4. The company's core inverter products are divided into grid-connected inverters and energy storage inverters. Since 23Q2, overseas energy storage inverters have been removed at an accelerated pace. According to our estimates, sales of the company's 23Q3 energy storage inverters fell by more than 50% over the same period last month, and grid-connected inverters were relatively less affected. From an industry perspective, overseas household storage is still in a stage of rapid growth. As a high-quality domestic inverter manufacturer, the company is expected to benefit from the long-term high growth trend and marginal improvement in demand in the energy storage market, and profits are expected to bottom out and pick up. We expect that the company's grid-connected and energy storage inverters shipments in 2023 may reach 65-70/80,000 units, respectively, and are expected to rise to more than 85/150,000 units in 2024.
Risk factors: PV installed capacity growth falls short of expectations; the company's component supply is tight; overseas inventory cannot be digested as expected; the company's production capacity release progress falls short of expectations; market competition exceeds expectations; and overseas trade friction.
Investment suggestion: As a leader in distributed photostorage inverters, the company is expected to fully benefit from the continuous increase in global demand and rapid growth, but considering that the company's inverter shipments fell short of expectations in the context of increased competition in the industry and overseas inventory removal, we lowered the company's 2023-25 net profit forecast to 9.8/14.9/20.04 billion yuan (the original forecast value was 14.5/20.6/2.65 billion yuan), and the corresponding EPS forecast was 2.45/3.73/5.08 yuan, respectively. The current price corresponding to PE is 27/18/13 times. Comparable companies in the inverter and energy storage industry (Hemai Co., Yuneng Technology, Goodway, Deye Co., Ltd.) in 2024, based on Wind's unanimous profit expectations, average PE was about 12 times. Considering that the company's grid-connected products continued to grow at a high level, energy storage product shipments are expected to accelerate restoration and accelerate the extension of product lines in the industrial, commercial and terrestrial power plant sectors, giving the company a PE valuation of 20 times in 2024, corresponding to the target price of 75 yuan, maintaining a “buy” rating.