Description of the event
Sunshine Power released its annual report and quarterly report. In 2023, the company achieved revenue of 72.251 billion yuan, up 79.47% year on year; of these, 2023Q4 achieved revenue of 25.836 billion yuan, up 43.27% year on year, up 45.21% month on month; net profit from mother of 2,217 billion yuan, up 44.61% year on year, down 22.74% month on month. 2024Q1 achieved revenue of 12.614 billion yuan, up 0.26% year on year, down 51.18% month on month; net profit to mother was 2,096 billion yuan, up 39.05% year on year, down 5.43% month on month.
Incident comments
In the inverter business, gross margin increased significantly in 2023, showing leading strength. In 2023, the company's inverter business achieved revenue of 27.7 billion yuan, an increase of 61% over the previous year. In terms of shipments, the company's photovoltaic inverter sales volume was 130 GW in 2023, an increase of nearly 70% over the previous year, maintaining the leading position. In terms of profit, the gross profit margin of inverters was 37.9% in 2023, an increase of 5.5 pct over the previous year. The company's profitability remains excellent. First, market/product structure optimization, overseas and distribution share increase; second, further cost-side optimization; third, IGBT modules are in high demand, improving the supply and demand relationship in the terrestrial power plant market; and fourth, falling freight rates and exchange rate factors.
The energy storage system business continued to grow rapidly in 2023, and the profit level in the second half of the year greatly exceeded expectations. Energy storage revenue in 2023 was 17.8 billion yuan, up 76% year over year. In terms of profit, the gross profit margin of the energy storage system in 2023 was 37.5%, an increase of 14.2pct over the same period last year. Beginning in 2023Q3, the profitability of large storage improved significantly, mainly due to the continuous optimization of the company's market structure and the decline in the prices of raw materials such as batteries. In addition, exchange rates and freight rates also led to a year-on-year increase in gross margin for the whole year.
In other businesses, Q4 power plants have accelerated, and profit levels have improved markedly. The 2023H2 power plant entered the peak season, and revenue increased dramatically. At the end of the year, the total development and construction of landscape projects exceeded 40 GW. The annual gross margin of the company's power plant development business was 16.4%. Thanks to lower manufacturing costs and improved supply and demand, the profit level of the company's power plant business in the second half of the year greatly exceeded expectations.
2024Q1's performance was better than expected, and the core was an overall improvement in profit levels. The inverter business is expected to maintain a good trend during the off-season, the overseas share will continue to increase, and the profitability of the terrestrial power plant market will continue to improve. Furthermore, the energy storage business remains strong, and revenue recognition in the power plant business during the off-season is low, and a small profit contribution is expected.
In terms of financial indicators, R&D expenses and contract liabilities reached record highs. The cost rate for the 2023 period was 11.78%, down 0.6 pct year on year, of which R&D expenses were 2.45 billion, an increase of more than 40% year on year. In addition, the company experienced asset impairment of 9.2 billion yuan and credit impairment of 520 million in Q4, which is expected to partially recover after subsequent processing of Vietnam's power plants. The cost rate during 2024Q1 reached 16.9%, an increase of 5.7pct over the previous month, of which the R&D cost rate exceeded 5%. The contract debt at the end of Q1 was 8.18 billion, up 109% year on year and 25% month-on-month, reaching a record high, reflecting the company's sufficient on-hand orders.
Looking ahead, the company's inverter energy storage leaders are stable, and profitability is expected to continue to perform well. In the inverter business, the company's leading position is stable. At the same time, profitability will continue to benefit from the optimization of the market and product structure, and there is no shortage of possibilities that it will continue to exceed expectations. In the energy storage business, the year-on-year growth rate of the company's shipments is expected to surpass the industry. Among them, the share of major storage markets such as Europe, Australia, Africa, and Southeast Asia is increasing at an accelerated pace. Profitability is also expected to remain at a high level thanks to leading brands and technical strength.
The company's net profit is estimated to return to mother in 24-25 billion yuan, which is 12 to 10 times the corresponding PE. Maintain a “buy” rating.
Risk warning
1. Deterioration of the competitive landscape;
2. PV installation falls short of expectations.