Event: The company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved revenue of 2,314 billion yuan, a year-on-year decrease of 27.76%; realized net profit of 174 million yuan, a year-on-year decrease of 160.55%; realized net profit deducted from mother of 263 million yuan, a year-on-year decrease of 197.04%; and achieved an overall gross profit margin of 39.71%, down 4.61 Pct from 2022. The 2024Q1 company achieved revenue of 582 million yuan, up 29.89% year on year; realized net profit of 0.29 million yuan, up 197.73% year on year; realized net profit deducted from mother of 13 million yuan, up 129.10% year on year; achieved overall gross profit margin of 46.52%, up 4.83 pct from 2023Q1.

Incident reviews:

The company's profits are recovering quarter by quarter, and we are optimistic about the future performance of the US and Japanese markets. 2023Q2-2024Q1, the company's revenue for the single quarter was 4.73/682/734/582 million yuan, respectively, -32.69%/-28.05%/-24.55%/29.89% year-on-year, respectively, and the profit growth rate improved quarterly. In the European market in 2023, due to falling natural gas prices and the normalization of the energy crisis, inventories of energy storage products continued to rise; in the Japanese market, changes in consumer performance preferences also further intensified market competition. The company continues to deepen its global brand strategy, and is committed to continuous development investment and brand building in the US and Japan markets. With 2024Q1, the company's revenue in the US and Japanese markets increased by 36.67% and 74.84%, respectively. It continues to be optimistic about the rigid needs of the company's portable energy storage products for outdoor activities and emergency disaster preparedness.

Inventory cost optimization combined with cost reduction and efficiency measures, 2024Q1 gross margin rebounded. The company's gross profit margin in 2023 was 39.71%, down 4.61 pcts year over year. Due to the impact of high-cost inventory and in order to cope with market competition, the company gradually stepped up product promotion efforts, which led to a decline in gross margin in 2023. With the optimization of inventory costs, the decline in raw material prices, and the continuous advancement of cost reduction and efficiency measures, 2024Q1 achieved 46.52%, an increase of 4.83 pcts over the previous year. In terms of period expenses, the 2024Q1 sales/management (including R&D)/R&D/ finance rates were 29.77%/6.95%/6.92%/-4.51%, respectively, a year-on-year decrease of 6.37/4.55/2.32/1.19pct. The company controlled the cost rate within a reasonable range through measures such as optimizing the labor cost structure and improving accurate advertising and material reuse.

The company actively broadens product lines and builds offline channels and independent brand sites to enhance brand influence and market share. The company is committed to broadening the technical moat of products and continuously promoting the iterative upgrading of products. In 2023, the company's full-scene household green electricity expert brand “Geneverse Electric Treasurer” successfully launched the first generation of fixed home storage products, integrating everything from photovoltaic power generation to electrochemical energy storage. The company is actively strengthening its global channel layout. Through the integration of independent websites, third-party e-commerce platforms, and offline retail channels, the company has established 21 independent official websites around the world, covering 40 countries and regions. At the same time, through close cooperation with world-renowned brands or retailers, the company's products have successfully entered nearly 10,000 world-renowned retail channels such as Costco, Harbor Freight Tools, Walmart, and Home Depot, further enhancing brand influence and market share.

Investment advice:

Considering the decline in industry demand, we revised the company's performance forecast. The company's net profit for 2024-2026 is estimated to be 1.68/2.43/250 million yuan (the previous forecast value for 2024-2025 was 269/379 million yuan), EPS was 1.35/1.95/2.00 yuan, respectively. The PE corresponding to the current stock price is 47.08/32.55/31.70 times, respectively. Considering that the company is a leader in portable energy storage, it continues to build an independent website, a third-party e-commerce platform, and a three-in-one channel for offline retail, so it maintains a “buy” rating.

Risk warning:

The risk of upstream cell price fluctuations; the risk of downstream demand falling short of expectations; the risk of increased market competition.