Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 57.251 billion yuan, a year-on-year increase of 24.53%, and realized net profit of 3.686 billion yuan, a year-on-year decrease of 8.38%, and a cash dividend of 0.55 yuan (tax included) per share; 2024Q1 achieved operating income of 15.917 billion yuan, an increase of 1.12% over the previous year, and achieved a net profit of 1,081 million yuan, a year-on-year decrease of 10.06%.

Household photovoltaics maintains the leading market share in the industry, and the global layout of the low-voltage electrical appliance business is progressing steadily.

(1) In terms of photovoltaic business, in 2023, the company added more than 12 GW of household photovoltaics connected to the grid, accounting for about 29% of the country's new household photovoltaic installed capacity. The market share remained the first in the industry. By the end of 2023, the installed capacity for self-owned households was about 14 GW, which led to a 38.11% year-on-year increase in the revenue of the PV business segment to 36.605 billion yuan, and the gross margin decreased by 2.13 pcts to 18.43% year on year.

(2) In terms of the low-voltage electrical appliance business, the company further restructured the distribution channel ecosystem in China. By the end of 2023, it had 445 first-level dealers and 21,860 second-level distributors, achieving a coverage rate of about 92% at the district and county levels; overseas, it accelerated the promotion of a global business architecture system centered on regional headquarters and localized subsidiaries, and international business revenue increased 16% year-on-year to 4.469 billion yuan in 2023. The company's low-voltage electrical business revenue increased 7.84% year on year to 20.039 billion yuan, and gross margin increased 1.85 pcts year on year to 28.04%.

(3) 2024Q1's low-voltage electrical and new energy business maintained a steady development trend. As of the end of the first quarter of 2024, the company held an installed capacity of 16.73 GW of photovoltaic power plants (+47.44% year over year), of which household use reached 14.45 GW (+60.96% year over year), and settled electricity reached 4,048 billion kilowatt-hours (+47.50% year over year).

Inverter energy storage business: Continue to deeply cultivate the North American and Korean markets, actively lay out and achieve breakthroughs in emerging markets such as Europe and Japan.

In 2023, the sales volume of the company's inverters and energy storage products increased 60.67% year on year to 168,000 units, driving the company's inverter and energy storage business revenue to increase 37.12% to 1,253 billion yuan, and gross margin decreased by 1.55 pcts year on year to 35.25%. The holding subsidiary of the company, Zhengtai Power, is deeply involved in the inverter and energy storage business. On the one hand, it continues to be deeply involved in the North American and Korean industrial and commercial inverter market, which has a high threshold and maintains the largest market share, successfully obtained ground project supply in the US and continues to maintain an exclusive supplier position for some customers in Korea; on the other hand, it relies on the technical advantages and perfect product sequence of high-power products to achieve order breakthroughs in Europe, and has obtained certification from relevant power companies in Japan. It is expected to provide strong support for the development of the company's energy storage business in the future.

Maintaining a “buy” rating: Due to sharp price fluctuations in the industrial chain, the profit of the company's related business has also been affected to a certain extent. As a prudent measure, we lowered our profit forecast. The company is expected to achieve net profit of 4.413/50.50/5.381 billion yuan in 24-26 (25% down/ 21% /increase). The current stock price corresponds to 10-fold PE in 24 years. The photovoltaic industry continues to be booming, and the market share of the company's household photovoltaic business is expected to further increase, the inverter and energy storage business is expected to contribute new performance increases, while the new energy (mainly new energy vehicles) and power equipment (mainly the State Grid and related power groups) sectors among downstream customers of low-voltage appliances will also maintain rapid growth in the context of “carbon neutrality” and maintain a “buy” rating.

Risk warning: The new installed capacity of photovoltaics falls short of expectations; grid investment falls short of expectations; overseas business operation risks.