Incidents:

On April 22, 2024, the company released its 2023 annual report. During the reporting period, the company achieved operating income of 1,420 million yuan, a year-on-year increase of 6.11%, realized net profit of 220 million yuan, a year-on-year decrease of 38.92%, and realized net profit without return to mother of 171 million yuan, a year-on-year decrease of 49.62%. The decline in the company's performance was mainly affected by the year-on-year decline in the sales scale of microinverters and changes in the revenue structure during the reporting period. At the same time, R&D, sales and other expenses increased significantly, and also affected by factors such as preparation for impairment.

The scale of slight reverse shipments declined slightly, and gross margin was basically stable

The company focuses on the field of photovoltaic power generation and new energy generation, providing distributed photovoltaic+energy storage full-scenario application solutions with micro inversion as the core. During the reporting period, the company's micro inverter business achieved revenue of 941 million yuan, a year-on-year decrease of 11.61%, a gross profit margin of 36.13%, a year-on-year decrease of 2.15 pcts, and achieved a sales scale of 842,500 microinverters, a year-on-year decrease of 9.91%. The micro reverse market is mainly in overseas regions where distributed photovoltaics developed earlier, such as North America and Europe. The industry has phased overcapacity in 2023, and overseas market inventories are high, which is the main reason affecting the company's micro reverse sales volume.

Promoting the integrated layout of optical storage, the new business grew extremely rapidly, forming the company's development system to expand the energy storage business market, lay out a “two-wheel drive for domestic and foreign markets, integrated and collaborative promotion of optical storage”. During the reporting period, it achieved a zero breakthrough in the energy storage business, achieved an operating income of 165 million yuan and a gross profit margin of 15.87%, accounting for 11.6% of the company's revenue scale in various business segments, growing rapidly. The holding subsidiary Ling Chu Yuneng focuses on industrial and commercial energy storage, while achieving multi-scenario coverage, and can provide energy storage systems and AES modular solutions. The company is promoting an increase in the development scale and delivery capacity of large-scale projects. Currently, the total scale of industrial and commercial user-side projects exceeds 500 MWh.

Credit and asset impairment losses affected profits, and R&D expenses increased significantly. Considering the slowdown in the growth rate of PV installation demand and the lengthening of the inventory removal cycle, the preparation for inventory price declines was large, and considering credit impairment losses such as accounts receivable and notes, the company calculated a total of 87 million yuan in credit and asset impairment preparations in 2023. Based on medium- to long-term strategic planning considerations, the company increased investment in R&D and market development during the reporting period, which led to a significant increase in R&D, sales, and management expenses.

Profit Forecasts, Valuations, and Ratings

We expect the company's 2024-2026 revenue to be 21.6/30.6/3.77 billion yuan, respectively, with year-on-year growth rates of 52.2%/41.7%/23.2%, net profit to mother of 3.4/50/ 630,000 yuan respectively, year-on-year growth rates of 56.1%/46.5%/24.8%, EPS of 3.07/4.50/5.62 yuan/share, respectively, and a 3-year CAGR of 41.88%. The industry's inventory removal cycle is longer than expected, which has a large impact on the company's shipping scale, and may affect the company's performance. Therefore, the performance expectations were lowered appropriately. Referring to comparable company valuations, we gave the company 24 times PE in 2024, with a target price of 73.69 yuan, downgraded to an “increase in holdings” rating.

Risk warning: Inventory removal cycle continues to lengthen; overseas policy risks; industry competition increases risk.