Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 7.48 billion yuan, +26% year over year, and realized net profit of 1.79 billion yuan, net profit after deduction of 1.85 billion yuan, +21% year over year; 2024Q1 achieved revenue of 1.88 billion yuan, -10% year over year; realized net profit attributable to mother of 433 million yuan, -26% year over year; realized net profit without return to mother of 425 million yuan, or -19% year over year.
Comment:
The inverter business achieved positive revenue growth, and gross margin remained high: in 2023, the company's inverter products achieved revenue of 4.43 billion yuan, +12%, accounting for 59% of the company's revenue; total sales of inverter products were 889,000 units, -34% YoY; energy storage inverters/ string inverters/ micro inverters sold 40.87/2067/273,500 units respectively, +37%/-16%/-66% YoY. In 2023, the company's inverter business gross margin was 52%, +4pct year-on-year. In the face of increased competition in the inverter industry, the company adopted a more active “going global” market strategy and set up after-sales service points in important sales regions such as South Africa, Germany, and Lebanon to open up a new blue ocean by penetrating into surrounding markets.
Energy storage battery packs increased significantly year-on-year, contributing to the increase in revenue: In 2023, the company's energy storage battery products achieved operating revenue of 800 million yuan, +965% over the same period, accounting for 12% of the company's revenue; total sales of energy storage battery packs were 127,600 units, +1093% over the same period last year. The company launched an energy storage battery product in mid-2022. After launch, it had a good synergy effect with its own energy storage inverter products, so it achieved significant growth in 2023.
The dehumidifier business grew steadily, and sales of the heat exchanger business picked up: In 2023, the company's dehumidifier products achieved operating revenue of 700 million yuan, +22% over the same period, accounting for 9% of the company's revenue. The company's products achieved the highest sales revenue for similar products on the JD and Tmall online platforms for eight consecutive years. In 2023, the company's heat exchanger products achieved operating revenue of 1.34 billion yuan, or +9% over the same period, accounting for 18% of the company's revenue. In 2023, due to factors such as macroeconomic and consumer environment improvements, downstream customer air conditioning sales increased, and heat exchanger sales picked up.
Profit forecast, valuation and rating: Considering the intensification of market competition in the inverter industry, we lowered the company's 24-25 profit forecast and added a 26-year profit forecast. The company is expected to achieve net profit of 22/28/3.5 billion yuan in 24-26 (35% down/36% /increase). The current stock price is 17/14/11 times PE for 2024-2026, respectively. Considering the broad long-term space for household storage and industrial and commercial storage, we continue to be optimistic about the company's long-term development and maintain a “buy” rating.
Risk warning: Optical storage machines fall short of expected risks; risk of fluctuations in raw material prices; risk of increased competition in the inverter market.