Key points of investment
Incident: The company's revenue in 2023 was 6.1 billion yuan, up 3.6%; net profit to the mother was 779 million yuan, down 26.5%; net profit from non-return to mother was 786 million yuan, down 24.8%, of which 2023Q4 revenue was 1,459 million yuan, down 15.3%; net profit to mother was 0.28 billion yuan, down 92.2%; net profit from non-return to mother was 0.14 billion yuan, down 95.6%; 2024Q1 revenue of 1.397 billion yuan, down 15.6% from the same period; net profit to mother decreased by 24.8%; net profit to mother of 0.2 billion yuan, same decrease of 93.7 percent %/year on year decreased by 29%; net profit after deducting non-return to mother was 0.14 million yuan, down 95.6% /month on month; performance was slightly lower than expected
Grid-connected shipments continued to increase, and energy storage gradually broke out of its trough. The company shipped about 747,000 inverters in 2023, a decrease of about 21%. Among them, 2023Q4 grid-connected and energy storage shipped about 19/1 million units, a slight increase over the month-on-month increase in energy storage; 2024Q1 grid-connected and energy storage shipped about 20/1+ 10,000 units, and energy storage continued to increase slightly month-on-month; profit-side 2024Q1 gross margin we expect to be less than 20%, mainly due to the fact that Europe accounts for a relatively low share of about 55%, with Europe accounting for a relatively low share of about 55%. Among them, Europe accounts for a relatively low gross margin, Asia, Africa, and China account for a relatively high domestic gross margin. Less than 10%, prices in Asia, Africa and Latin America are relatively low ① The low gross margin of some power segments is lower than in Europe, and the average price dropped significantly year-on-year due to the reduction in average power; ② The gross margin in 2024Q1 was lower due to the use of some high-priced inventory materials. Looking ahead to the second quarter, both profit and profit are expected to rise:
Production is scheduled to exceed 100,000 units in April 2024. The overall production schedule for 2024Q2 inverters is expected to reach 300,000 units, of which energy storage is expected to reach 2-3 million units, and the overall increase of 100,000 units is mainly contributed by overseas markets. Overseas share increases to 70%. Combined with digestion of high-value materials and component price reduction, gross margin is expected to recover drastically. Considering the scale effect of power electronics, we expect net profit margins to rise sharply to normal levels; the second half of the year is expected to improve quarterly. It is expected that grid-connected shipments will reach 1.2 million units+ and 100,000 energy storage units +, all with the same increase of 50 per cent %+.
Distributed generation 2024Q1 has a relatively low seasonal impact on power generation, which is still the main support for profits. The company achieved a total revenue of 1.49 billion yuan in household photovoltaic power generation systems and new energy power production business in 2023, with a year-on-year increase of about 500 million yuan. By the end of 2023, the company's distributed power plants had accumulated grid-connected volume of 1,187 MW; 2024Q1 achieved revenue of about 400 million yuan and contributed about 90 million yuan in profit, mainly due to seasonal factors. The number of power generation hours in the fourth quarter and the first quarter was expected to drive a recovery in profits and steady growth throughout the year.
Expense ratios have increased significantly, and operating cash has turned negative. The company's 2023/2024Q1 expense ratio was 18%/23%, an increase of 5/8 pct over the previous year. Expenses also increased by 44%/30% to 1.1 billion yuan/320 million yuan during the period, mainly due to a decrease in revenue scale and an increase in interest due to an increase in the scale of subsidiary project financing. 2024Q1 had a net operating cash outflow of $0.7 billion, with a decline of 398 million dollars, mainly due to a decrease in sales payments and an increase in expenses for the period.
Profit forecast and investment rating: Considering the decline in average power driven by a decline in sales prices, we lowered the 2024-2025 profit forecast and added the 2026 profit forecast. We expect the company's net profit to be 10.8/15.5/2.07 billion yuan in 2024-2026 (the value was 14.1/1.89 billion yuan before 2024-2025), an increase of 39%/44%/33%, corresponding PE is 20/14/11 times. Considering the significant month-on-month improvement in the company's grid-connected shipments, we are expected to continue to grow quarterly and maintain the “purchase” evaluation grade.
Risk warning: Increased competition and policies falling short of expectations.