The company released its 2023 annual report and 2024 quarterly report, and the 2023/2024Q1 results increased 31%/decreased by 109% year-on-year respectively. The company's grid-connected inverter business has performed steadily. Energy storage inverters are affected by inventory growth and are expected to be gradually repaired and improved in the future. Maintain an increase in holdings rating.

Key points to support ratings

The company's performance in 2023 increased 31% year on year: the company released its 2023 annual report, achieving revenue of 7.353 billion yuan, an increase of 56.10%; realized net profit to mother of 852 million yuan, an increase of 31.24% year on year; realized deducted non-net profit of 806 million yuan, an increase of 28.51% year on year.

2024Q1 Company's performance loss: The company also released its 2024 quarterly report. 2024Q1 achieved net profit to mother of -29 million yuan, a year-on-year decrease of 108.57%, a year-on-year decrease of 108.57%, and a month-on-month loss. We believe that the loss of the 2024Q1 company was mainly due to a 34.50% year-on-year decline in revenue, while various expenses were relatively fixed, and the expense ratio increased sharply by 14.14 percentage points to 29.17% year-on-year during the period.

The performance of grid-connected inverters was steady: in 2023, the scale of global PV installations continued to increase, and the company's grid-connected inverter business revenue increased accordingly. Annual revenue increased 42.99% year over year to 2,861 billion yuan, sales increased 15.46% year on year to 532,200 units, and gross margin fell slightly by 0.46 percentage points year on year to 29.43% year on year.

Pressured by industry inventories, the growth of energy storage inverters is under pressure, and battery pack sales are being actively expanded: in the second half of 2023, the company's energy storage inverter business was under pressure; the annual sales volume decreased by 32.20% to 154,400 units year-on-year, causing the sector's sales revenue to drop 4.67% year on year to 1,566 billion yuan. The company is actively expanding its layout in the field of energy storage. Shipments of energy storage battery pack products continued to increase in 2023. Sales volume increased 27.74% to 341.15 MWH year on year, and revenue increased 38.66% year on year to 869 million yuan. At the same time, thanks to the decline in battery material costs, the gross margin of battery packs also increased 7.18 percentage points to 24.96% year on year.

Inventory elimination in Europe is nearing its end, and demand for energy storage inverters may be high and low in 2024:

According to the company's announcement, the current inventory of energy storage inverters in Europe is rapidly declining. Inventory removal is expected to be completed in the next 2-3 months, and energy storage demand is expected to be low and high in 2024. In addition, demand from regions such as Australia, Southeast Asia, and Brazil is gradually being released. We believe that with inventory removal and the release of the company's new products, the company's energy storage business is expected to improve quarterly within 2024.

valuations

Under the current share capital, combined with the company's current shipping and profit pressure, we adjusted the company's 2024-2026 earnings forecast to 4.06/5.24/6.35 yuan (the original 2024-2026 forecast was 9.07/11.47/- yuan), corresponding to a price-earnings ratio of 23.4/18.1/14.9 times; maintaining an increase rating.

The main risks faced by ratings

Prices of raw materials have risen above expectations; new business expansion has fallen short of expectations; price competition has exceeded expectations; PV policies have fallen short of expectations; demand in the energy storage industry has fallen short of expectations.