1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of 599 million yuan, +33.8% year on month, +34.7% month on month; net profit to mother of 66 million yuan, +6.0% year on month, -48.9% month on month; net profit after deducting non-return to mother of 60 million yuan, +5.0% year on month, or -50.9% month on month. The company's performance was in line with our expectations.
Development trends
Charging business revenue continued to grow at a high year-on-year rate, and profitability remained high. We estimate that 1Q24's charging business revenue is about 230 million yuan, an increase of about 45-50% over the previous year, and the gross margin is estimated to be 40%, which remains high. In 1Q24, 75,000 new public DC piles were added in China, an increase of 22-23%. Despite being in the off-season, it still achieved a good growth rate. Combined with some year-end 2023 order transfers and product structure optimization (increasing the share of high-value charging stack products), the company's 1Q24 charging pile business continued the high growth trend. 2Q24 is the peak delivery season for charging pile projects. We are optimistic that the company's charging pile revenue will improve month-on-month. Looking at 2024, with domestic policy support and diversification of downstream construction agents, domestic charging pile construction is still expected to maintain a high level of prosperity.
The energy storage business is growing steadily, and gross margin has declined somewhat due to the product structure. We estimate that 1Q24's energy storage business revenue was about 210 million yuan, an increase of about 25%. 1Q24 domestic large storage was affected by lithium carbonate price cuts and the Spring Festival, and overseas industry and commerce were affected by the high interest rate environment, and demand was relatively lackluster; in terms of profit, we estimate that 1Q gross margin was about 30%, a decrease of 2-3 ppt month-on-month, mainly due to the business structure. We estimate that 1Q24's low-profit domestic business revenue increased to 65-70%. Looking ahead to 2Q24, as lithium carbonate prices stabilize, we believe that domestic demand for large storage is expected to be released at an accelerated pace, and downstream pickups and tenders will pick up significantly in March; however, North American industrial and commercial energy storage demand may still be suppressed by the high interest rate environment, waiting for the inflection point of interest rate cuts.
Gross profit margin declined year-on-year, and expenses remained high. The company's 1Q24 gross profit margin was 39.5%, 3ppt year over year. On the one hand, it was affected by the decline in gross margin of energy storage, and on the other hand, the cost increase brought about by the 1Q24 Suzhou factory climbing; in terms of cost ratio, the overall cost rate for 1Q24 was 28.7%, +0.5ppt year over year, of which the sales cost rate/management fee ratio was +0.5ppt, respectively, and mainly due to the slope of the Suzhou factory, low capacity utilization rate, and high cost sharing.
Profit forecasting and valuation
We maintain our 2024/2025 profit forecast of 509/634 million yuan, maintain a target price of 38.8 yuan and outperform industry ratings. The current stock price corresponds to 2024/2025 18.0x/14.5x P/E, and the target price corresponds to 2024/2025 23.5x/18.9x P/E, with 31.5% upside.
risks
China's charging pile construction fell short of expectations, global energy storage installations fell short of expectations, and market competition intensified.