2023 and 1Q24 results fell short of our expectations
The company announced 2023 and 1Q24 results: 2023 revenue of 8.141 billion yuan, +44.13% year-on-year, and net profit to mother of 508 million yuan, +104.36% year-on-year. 1Q24 revenue was 1.284 billion yuan, -20.54% YoY, -55.14% month-on-month, and net profit to mother was 774 million yuan, or -48.76% YoY, +17.94%. Affected by asset impairment losses, the 2023 results were lower than our expectations; 1Q24 new energy shipments were lower than the same period last year, and 1Q24 performance was lower than our expectations.
Development trends
Benefiting from the global boom in photovoltaic energy storage, new energy business orders are expected to be released at an accelerated pace in the next quarter.
In 2023, the company's revenue of new energy products was 4.294 billion yuan, +142.78% year-on-year, ranking first in Chinese enterprise energy storage PCS shipments and number one in Chinese customer-side energy storage system shipments. We expect their photovoltaic/energy storage revenue to be about 10/3.2 billion yuan respectively, of which energy storage PCS/system integration will account for 36%/64% of energy storage revenue. The first quarter is traditionally a low season for delivery. We believe that the time difference in revenue confirmation for individual system integration projects may cause fluctuations in the single quarter's performance, and the company has plenty of orders in hand (receiving 1.2 billion yuan of pre-bid orders for independent energy storage projects in Kerzhou in January). With the arrival of the grid-connected node in mid-year, the company's 2Q24 new energy performance is expected to be released quickly.
IDC's service revenue has declined slightly, and demand for computing power is expected to drive the company's performance growth. In 2023, the company's data center business revenue was 2,763 billion yuan, of which IDC service/data center product revenue was 1,289/1,474 billion yuan respectively, -12.86%/+10.13% year-on-year, mainly due to industry transformation. The company is actively building computing power, launching products such as liquid-cooled micromodules and AI bare metal leasing services, developing customers such as finance, the Internet, government agencies, etc., and reaching strategic cooperation with Bose Quantum and National Shield Quantum to explore. We are optimistic that the company's data center business will contribute to performance flexibility.
The cost ratio improved slightly during the period, and the gross margin increased markedly in 1Q24. The company's sales/management/R&D/finance expenses in '23 were 9.1%/3.2%/5.8%/0.9%, respectively, compared with +0.1pp/-0.8pp/ -0.4pp/ -0.7ppt. The company focuses on R&D investment and continues to innovate products. R&D expenses were +34.7% compared to the same period last year, and technical reserves are leading in the industry. Furthermore, the company achieved a gross profit margin of 32.3% in 1Q24, +2.5ppt year over year, and +8.4ppt month-on-month. We believe this is mainly due to changes in business structure, differences in product sales and system integration gross margin. We are optimistic about future improvements in the company's operating efficiency, combined with an increase in the share of overseas business structures, and steady profitability.
Profit forecasting and valuation
Keep the 2024/2025 profit forecast of 80/1.03 billion yuan unchanged; considering the rising demand for computing power driven by AI, the target price was raised by 9% to 30 yuan to maintain the outperforming industry rating. The current stock price corresponds to 14.6x/11.3x P/E in 2024/2025, respectively, and the target price corresponds to 17.3x/13.5xP/E in 2024/2025, respectively, with 19% upward space.
risks
Demand in the energy storage industry fell short of expectations; profitability of the energy storage business declined; demand for data centers was weak.