Description of the event

Jinlang Technology released its 2023 three-quarter report. The first three quarters of 2023 achieved revenue of 4.64 billion yuan, an increase of 11% over the previous year; net profit of 750 million yuan, a year-on-year increase of 7%; of these, 2023Q3 achieved revenue of 1.39 billion yuan, a year-on-year decrease of 19%; and net profit of 124 million yuan, a year-on-year decrease of 59%.

Incident comments

The company's Q3 reporting side performance fell short of expectations. The main reason may be that there were many exchange losses and equity incentive expenses, which caused the company to incur financial expenses of 90 million yuan in Q3, an increase of 110 million over the previous month, management expenses of 100 million yuan, and an increase of 0.3 million over the previous month. Affected by this, the company's expense ratio during Q3 reached 25.4%, a significant increase from 13.6% in Q2. Excluding the above effects, we believe that the company's Q3 business performance is in line with expectations.

Looking at the quantitative profit split, in terms of shipment, we expect Q3 grid-connected inverter shipments to drop slightly month-on-month, energy storage performance is relatively lackluster, and the overall trend is in line with the industry. By market, European shipments have been blocked due to summer holidays and channel inventories, and emerging markets such as Asia, Africa, and Latin America have stabilized and improved. In terms of profit level, Q3's consolidated gross profit margin was 33.7%, down 3.1 pct from month to month, mainly due to exchange rate fluctuations, and actual sales prices are expected to be stable. Furthermore, the performance of the company's power plant business was stable and continued to contribute to profit growth.

Looking ahead, we expect that the company's European channel inventory will be eliminated by the end of 2024Q1, and household storage demand is expected to re-enter the growth channel at that time. At the same time, there are many intended orders for the company's industrial and commercial modular PCS products in the domestic market, and it is expected that they will be released in 2024. Overseas industrial and commercial storage all-in-one machines cater to demand trends, and are also expected to accelerate volume release, driving up the unit price of the company's products.

We expect the company to achieve profit of 1 billion to 1.5 billion dollars in 2023-2024, corresponding to PE 28 or 18 times. Maintain the buy rating.

Risk warning

1. The competitive pattern deteriorated;

2. PV installation falls short of expectations.