The 2023 results are in line with forecasts and market expectations. The 1Q24 results slightly exceeded our expectations. The company announced 2023 and 1Q24 results: 2023 revenue of $72.255 billion, up 79.47% year on year; net profit to mother of 9.44 billion yuan, up 162.69% year on year, corresponding to profit of 6.36 yuan per share, which is in line with performance forecasts and market expectations. 1Q24's revenue was 12.614 billion yuan, up 0.26% year on year, and net profit to mother was 2,096 billion yuan, up 39.05% year on year, slightly exceeding our expectations. This was mainly due to a significant increase in gross margin and net interest rate over the same period, and high profit growth.
The company continues to promote cost reduction and efficiency, and the advantages of scale are strengthened. The company's gross margin was 30.36% in '23, +5.81ppt, and 1Q24 gross margin further increased to 36.67%. We believe that, on the one hand, the reason was the company's improved product competitiveness and product restructuring, which had a brand premium, and was also driven by short-term factors such as falling freight rates and exchange earnings. The net interest rate for '23 was 13.30%, +4.12ppt, and the sales period expense ratio was 11.78%, -0.63ppt. Mainly driven by a decline in management and sales expenses, the 1Q24 net interest rate increased to 16.71%, +4.6ppt, and month-on-month.
Development trends
The optical storage business continued its strong performance, and the global brand strength was highlighted. In terms of photovoltaic inverters, the company shipped 130 GW in '23, an increase of 69% over the previous year. The company has stable product quality, perfect after-sales service, comprehensive channel layout, brand premiums, and the inverter power range covers 3 kW-8800 kW, achieving full category coverage. The SG320HX and 1+X modular inverter products are widely used in the world to achieve the world's first 2000V inverter connected to the grid. In terms of the energy storage business, shipments were 10.5 GWh in '23, an increase of 36% over the previous year, and the company was deeply involved in energy storage technology, innovating and launching stem cell grid technology in '23, and releasing the first 10MWh fully liquid-cooled energy storage system. In addition, benefiting from a relatively high share of shipments in high-profit overseas markets, the gross margin of the energy storage business increased by 14ppt to 37.47% year-on-year. In terms of new energy investment and development, the company accelerated its transformation to distributed, the annual installed capacity of household photovoltaics increased by 200%, and the business gradually improved. 1Q24's inverter shipments increased 37% year over year, and the lower revenue from the energy storage and development business was mainly affected by seasonal factors. We are optimistic that in '24, the company will benefit from overseas centralized PV ground power plants and large storage volumes. Shipments will remain high, and energy storage is expected to reach 20GWh+. The leading position in optical storage is stable, and continues to lead the high-quality development of the photovoltaic industry.
Profit forecasting and valuation
We kept our net profit of $11.65 billion unchanged in 2024, and introduced net profit of $13.46 billion in 2025 for the first time. The outperforming industry rating and target price of 115 yuan remain unchanged, corresponding to the price-earnings ratio of 15/13 times in 2024/2025. There is 22.4% room to rise compared to the current stock price. The current stock price corresponds to the price-earnings ratio of 12/10 times 2024/2025.
risks
PV demand falls short of expectations, competition increases risks, trade policy changes, and exchange rate fluctuations.