Company profile:
The company is a global leader in household storage inverters. In 2023, domestic companies ranked first in global shipments of energy storage inverters below 30KW. The company's European revenue share is relatively high, accounting for about 60% of overall revenue in the first half of 2023, and performance is under pressure in the context of high European inventories. According to the company's performance report, in 2023, the company achieved operating income of 7.352 billion yuan, +56.09%, of which Q4 achieved revenue of 1,702 billion yuan, -5.17% YoY, and -7.31%, and realized net profit to mother of 868 million yuan, +33.65% YoY, of which Q4 achieved net loss of 25 million yuan, -106.7% YoY and -116.49% YoY.
Investment logic:
European household optical storage space is vast, and demand is expected to gradually pick up after inventory is reduced. Europe's rooftop photovoltaic space is vast. Under conservative estimates, it can accommodate 580 GW of PV installations, corresponding to the current penetration rate of about 30%. Economy is a decisive factor in determining household storage demand in Europe. Household storage economy suffered a setback in the context of lower electricity prices and high interest rates. According to estimates, the electricity cost of a typical household optical storage system in Germany was about 35 Eurocents/kWh in January 2024, which did not have a clear economic advantage compared to residents' electricity prices during the same period. However, considering that electricity prices and natural gas prices for European residents have now returned to the level before the energy crisis, it is expected that there will be limited room for subsequent decline; however, as interest rates peak and downward and the reduction in upstream battery and component prices gradually spread to terminals after inventory problems are mitigated, household storage economy is expected to continue to improve, and demand for European household optical storage is expected to pick up.
The company has accumulated deep channels and technology, and is expected to fully benefit from this round of recovery in European demand. The company has extensive channel accumulation. The total number of dealers in the European core household storage market is 66, leading distributed inverter companies of the same type. In 2023, the installer loyalty program was launched to further consolidate the influence of downstream dealers and installers through various preferential policies such as extending warranty periods; in terms of technology, the company has been deeply involved in energy storage inverters for many years, and related products won the highest A rating in Germany's 2024 official efficiency test. At the same time, compared with overseas brand products at the same level in testing, the company has a clear competitive advantage in terms of price and compatibility. As European saver demand recovers, the company's energy storage and storage energy storage Revenue is expected to return to high growth.
Profit forecasts, valuations, and ratings
We forecast that in 2023/2024/2025, the company will achieve operating income of 7.35 billion/ 8.29 billion yuan/10.58 billion yuan, +56.1%/+12.7%/+27.6% YoY, net profit to mother of 870 million/770 million/1.03 billion yuan, +33.6%/-11.7%/+34.7% year-on-year, corresponding EPS of 5.02/4.43/5.96 yuan. As the economy of household optical storage continues to improve in Europe, demand for household grid-connected and energy storage inverters is expected to gradually pick up, and the company is expected to fully benefit from good channel layout and excellent product quality. Considering that the company accounts for a relatively large share of revenue in the European market, the current stock price fully reflects pessimistic expectations. The target price for 2024 is 25XPE, with a target price of 110.71 yuan, which is covered for the first time, giving it a “buy” rating.
Risk warning
Competition intensified; exchange rate fluctuations; overseas interest rate cuts fell short of expectations.