Key points of investment
Incident: The company released 23 annual reports, achieving revenue of 1,122 million yuan, +10% year-on-year, and net profit of 210 million yuan to mother, +18% year-on-year. Among them, Q4 achieved revenue of 247 million yuan, +0.4% year-on-year, -27% month-on-month, and net profit to mother of 0.28 million yuan, -14% year-on-year and -63% month-on-month. The gross margin for the year 23 was 46.39%, +0.24pct year on year, the net profit margin to mother was 17.95%, +1.20pct year on year, Q4 gross profit margin 41.41%, the same /month on month -5.41/-5.57pct, net profit margin 11.15%, or -1.90/-10.60pct. The performance is in the middle of the forecast, which is basically in line with market expectations.
Downstream demand is slowing down cyclically, opening up room for growth by actively going overseas. In '23, the company's enterprise microgrid and system achieved revenue of 1,006 billion yuan, +12% year over year, gross profit margin of 46.8%, and +2.18 pct year over year.
Most of the domestic manufacturing PMI was below 50, and fixed asset investment growth fell below 10%. The company's registered projects fell short of expectations due to a slowdown in downstream demand. However, the company actively adjusted its strategic layout to focus on booming industries+focus on transformation+ accelerate the layout of overseas markets. Among them, overseas revenue of +128% compared to the same period was beginning to be effective, actively seeking development, opening up space for the company's growth. In 24, we expect corporate microgrid and system revenue to grow by nearly 20%.
The EMS product upgrade trend has not changed, and the product array is being perfected yet to blossom. Benefiting from a 23 year increase in gross margin of software products, +0.25pct year over year, after the introduction of EMS 2.0 and 3.0 systems, the company continued to increase R&D investment, +6% year-on-year, and the company promoted the sales strategy of R&D to marketing, effectively enhancing the professionalism of the sales team. The company also increased research and development of products such as source network load storage platforms and charging piles, improving the company's system solution integration capabilities, and is expected to achieve rapid profit growth after downstream recovery.
Selling expenses increased healthily, and cash flow improved markedly. The company's expenses during the 23-year period were +10% to 359 million yuan, of which sales expenses were +19% to 163 million yuan. The main reason was that the company continued to increase sales investment, some R&D personnel transformed technical sales, and overseas team expansion. The net cash flow inflow from operating activities in '23 was 315 million yuan, a significant improvement over the same period. Inventory at the end of the period was 172 million yuan, down 46 million yuan from the beginning of the period, the number of inventory turnover days decreased by 36.51 days to 116.53 days, and operating efficiency also improved markedly.
Profit forecast and investment rating: Considering downstream capital expenditure or continued pressure, our downgrade company's net profit for 24-25 was 2.5 (-0.8) /3.3 (-140) million yuan. We expect net profit to be 410 million yuan in '26, +25%/30%/26% year-on-year, and the corresponding current price valuations are 19x, 14x, and 11x, respectively, maintaining a “buy” rating.
Risk warning: Downstream capital expenditure falls short of expectations, conversion rates of registered projects fall short of expectations, increased competition, etc.