Acquired Zhengtai Power and expanded its new energy business. In 2023, the company completed the acquisition of Zhengtai Power, and its main business also expanded from the original metal products business to the field of new energy. Established in 2009, Zhengtai Power mainly provides complete photovoltaic inverters and energy storage system products and solutions for the new energy and power industry. The products are sold to 30 countries and regions around the world, including the United States, Japan, Germany, South Korea, Brazil, etc., and the cumulative delivery volume exceeds 25GW. The core products include string photovoltaic inverters, centralized photovoltaic inverters, energy storage converters, energy storage systems, photovoltaic energy storage monitoring and energy management systems, and energy storage system accessories.
Zhengtai Power's steady growth over 23 years, restructuring and other factors affected the consolidated report results. According to the 23-year performance forecast, the company achieved net profit of 0.52 to 77 million yuan in 23, a year-on-year decrease of 48.19-65.10%.
The main reasons for the year-on-year decline in net profit were: 1. Profit decreased due to restructuring expenses arising from acquisitions; 2. On June 1, 2023, Chentai Power was included in the scope of the company's merger, which led to an increase in inventory cost carry-over and asset amortization of part of the consolidated caliber due to asset appreciation and appreciation on the consolidated day; 3. The impact of exchange rate fluctuations. This accounting treatment only affects the company's consolidated income statement. The company's subsidiary, Zhengtai Power, is doing well, and sales revenue and net profit have maintained steady growth.
Localized services build overseas barriers, and the product layout has advantages. According to the 23 semi-annual report, the company has established localization teams in many overseas countries to quickly respond to local customer needs and continuously enhance brand influence. This localized service method enhances Zhengtai Power's ability to withstand local market fluctuations and helps achieve the company's long-term sustainable development. Zhengtai Power has a wide variety of products in the field of photovoltaic inverters and energy storage. PV inverter products can meet the needs of different application scenarios such as homes (2KW-40KW), industrial and commercial roofs (50KW-125KW), and terrestrial power stations (125KW-4400KW). According to the WeChat account of Zhengtai Power, with its steady financial situation, reliable product quality, and good corporate reputation, it ranks first in the list of the most valuable inverter brands in the world, and has become the most valuable photovoltaic inverter brand in the world.
The US and European markets are expected to help the company achieve greater breakthroughs. According to Shenzhen Stock Exchange Interactive Easy, the company leads the market share in inverter segments such as North America and South Korea, and began operating in the European market in '23. The 320/350KW high-power string inverter product was launched in the first half of '23, which can perfectly fit the 182 and 210 high-power components on the market. With the advent of new photovoltaic application scenarios in the North American market, the company has gradually become a leader in the small terrestrial photovoltaic power plant market. The gross margin of photovoltaic inverters for small terrestrial photovoltaic power plants is above average.
Investment advice: We forecast net profit of 0.65/2.93/415 million yuan in 23-25 years, up -56.5%, 351.4%, and 41.8% year-on-year. Referring to comparable company valuations, we gave the company a 24-year PE valuation 20-22 times, with a corresponding reasonable value range of 16.18-17.80 yuan, giving it a “superior to the market” rating.
Risk warning: downstream demand falls short of expectations; increased competition; new technology substitution; fluctuating product prices.