2023&1Q24 results are in line with our expectations

The company announced 2023 and 1Q24 results: in 2023, it achieved revenue of 2,026 billion yuan, a year-on-year increase of 31.9%, net profit to mother of 512 million yuan, a year-on-year decrease of 3.9%, and net profit after deducting non-return to mother of 527 million yuan, an increase of 2.2% over the previous year. Net profit attributable to mother for 2023 after deducting share payment fees was 619 million yuan, up 14.1% year on year; 1Q24 achieved revenue of 331 million yuan, -42.9% year on month, -4 6.4% month on month, and net profit to mother 67 million yuan, -61.8% year on year, and -30.2% month on month. The 2023 & 1Q24 results were in line with our expectations.

Shipments grew steadily in 2023, and the impact of high inventories in the European market was gradually mitigated by the recovery of 1Q24 shipments. In 2023, the company shipped 1,318,800 units in reverse, an increase of 14% over the previous year, and 237,500 monitors were shipped.

The 1Q24 company shipped about 230,000 units in reverse, an increase compared to 3Q23 and 4Q23 shipments, and monitor shipments of about 60,000 units. We believe that inventory removal through the European market channel has gradually come to an end. Currently, the number of orders received by the company in April increased month-on-month.

Profitability is stable. The gross margin of the company's main business was basically stable at 44.0% in 2023. Among them, the gross margin of the micro inverse business was +0.5ppt to 50.3% year over year, and the gross margin of the energy storage system business was -2.1ppt to 16.6% year over year. In terms of period expenses, the cost rate for the 2023 period increased by 11ppt to 19.2%. Among them, the R&D expenses rate increased by 5.9ppt to 12.2% year over year, mainly due to the company's continued increase in R&D investment, share payment cost sharing, and accelerated exercise of rights included in R&D expenses.

Development trends

R&D investment continues to increase, and product matrices for micro inverse and energy storage businesses are constantly being improved. In 2023, the company's R&D investment increased by 154.4% year-on-year to 248 million yuan, and the number of R&D personnel increased 77% to 377. Relying on the competitive advantage of micro-inverse products, the company actively expanded the energy storage business layout and strengthened research and development of medium- and high-power energy storage products, and the product matrix was continuously improved. In the MLPE field, for the first time, the company launched built-in WiFi micro inverters in Latin America and Europe, which are more suitable for localization needs. At the same time, it also launched high-power micro inverters suitable for industrial and commercial scenarios; in terms of energy storage, the company launched centralized energy storage products and booster all-in-one products. On the one hand, we believe that micro-inverse products are naturally suitable for household photovoltaic scenarios, while high-power micro-inverse products are expected to further increase penetration in industrial and commercial scenarios. We are optimistic that the company will increase its market share with its high-quality products and higher cost performance compared to overseas manufacturers; on the other hand, the company's energy storage business is progressing smoothly. We expect the energy storage business to double this year, and the rich product matrix is expected to guarantee the company's steady growth in different market environments.

Profit forecasting and valuation

The net profit for 2024/2025 remains unchanged at 72/91 million yuan. The current stock price corresponds to the price-earnings ratio of 25/20 times 2024/2025, maintains the outperforming industry rating and target price of 300 yuan unchanged, and corresponds to 35/27 times P/E for 2024/2025, with 38% room for improvement compared to the current stock price.

risks

Overseas PV installation demand falls short of expectations, industry competition intensifies, and trade friction risks.