Strong increase in performance in 2023, PV module volume led to an increase in revenue performance, and maintained a “buy” rating

The company's revenue in 2023 was $2,879 million (+47.68%), net profit attributable to mother of $202 million (+70%), after deducting non-net profit of $182 million (+78.88%). 2023Q4 had revenue of 594 million yuan (-14.96%), net profit attributable to mother of 21 million yuan (+90.03%), and achieved 13 million yuan (+67.84%) after deducting non-net profit. Considering that production capacity releases are affected by the PV cycle and production expansion plans are undecided, we have lowered the 2024-2025 profit forecast and added 2026 profit forecast. The company's net profit for 2024-2026 is 2.6/31/350 million yuan (the original value for 2024-2025), corresponding EPS is 0.8/1.0/1.2 yuan, the corresponding PE price is 11.6/9.7/8.4 times, and the basic market for home appliances is stable. The new energy sector continues to expand and maintain a “buy” rating.

The home appliance business stabilized, and the photovoltaic energy storage business became a new pillar. Looking at the subsequent rise in production capacity, looking at the sub-business segment, (1) white power business: revenue of 701 million yuan (+11.36%), accounting for 24.35%, of which revenue from compressors such as refrigerators, freezers, air conditioners, etc., and ancillary products for small household appliances increased revenue of 14 million yuan (-16.2%); (2) Motor business: revenue of 173 million yuan (+5.44%), accounting for 6%.; (3) The Sun Energy PV modules: Revenue of 1.97 billion yuan (+75.96%), accounting for 68.46%; the subsidiary Fuller New Energy had 2023 revenue of 1.97 billion yuan (+74%) and net profit of 100 million yuan (+526%). In 2024, it signed a distributed PV module contract with China Nengjian Dongdian for 1,014 billion yuan. The 2GW annual output project was officially put into operation at the end of January 2024. The annual production capacity is expected to reach 3.5 GW. After completion, an additional output value of 2.74 billion yuan will be added. I am optimistic that the company's production capacity will rise steadily to drive growth.

The gross margin of PV modules increased, and the cost control effect was obvious. The net margin increased the company's gross profit margin by 14.96% (+0.02pcts) in 2023, of which the 2023Q4 gross profit margin was 7.07% (-4.76pcts), and the gross margin decreased or the share of revenue of low-margin PV module products increased. By business, the gross margin of the company's white power sector/motor business/photovoltaic module business in 2023 was 32.16%/8.96%/9.30%, respectively, and +1.03/-2.03/+2.96pcts, respectively. On the cost side, the cost rate for the 2023 company period was 6.79% (-1.28pcts), with sales/management/R&D/finance expenses ratios -0.31/-0.19/-0.94/+0.15pcts, respectively; the 2023Q4 company period expense ratio was 4.32% (-4.52pcts), of which the sales/management/R&D/finance expense ratios were +0.08/-0.14/-4.20/+0.21pcts, respectively. Under the combined influence, the company's net sales profit margin in 2023 was 7.4% (+1.07pcts), after deducting 6.32% (+1.10pcts) of non-net interest rate. 2023Q4 has a net sales margin of 3.63% (+1.87pcts), after deducting 2.16% (+1.06pcts) of non-net profit.

Risk warning: raw material prices fluctuate; capacity release falls short of expectations; new energy business expansion falls short of expectations.