Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 6.1 billion yuan, +3.6% year over year; realized net profit of 780 million yuan, -26% year over year; realized net profit without return to mother of 790 million yuan, -25% year over year. In 2024, Q1 achieved revenue of 1.4 billion yuan, -15.6% year over year; realized net profit of 0.2 billion yuan, -94% year over year; realized net profit without deduction of $0.14 billion, or -96% year on year.
Comment:
Under pressure to remove storage, the revenue of the energy storage inverter business declined sharply in '23. In 2023, the company's energy storage inverter business achieved revenue of 430 million yuan, -59% year on year; gross profit margin was 37%, +3 pct year on year. The decline in revenue from the energy storage inverter business is mainly due to inventory backlogs in Europe. As inventory levels gradually return to a reasonable range, the company's energy storage inverter shipments are expected to improve quarterly.
The share of domestic sales increased, putting pressure on the profit of the grid-connected inverter business in '23. In 2023, the company's grid-connected inverter business achieved revenue of 4.1 billion yuan, +1.53% year over year; gross profit margin was 22%, -5.8pct year on year. With high inventories of grid-connected inverters in the European market, the company's domestic sales share increased by 60% in 2023, up to +16pct. The gross margin in the domestic market is low, lowering the overall gross margin level of the grid-connected inverter business.
Multiple factors combined to cause 24Q1 net profit to drop sharply, and we are optimistic that profits will improve quarterly. First, the European market is an important market for sales of the company's photovoltaic inverters and energy storage inverter products. Against the backdrop of the European inverter inventory backlog, the company's 24Q1 shipments are under pressure; secondly, the first quarter is the traditional low season for domestic PV installations, so the company's domestic PV inverter business has also been affected to a certain extent. As European inverter inventory levels gradually return to a reasonable range and domestic PV installation demand increases, the company's performance is expected to pick up quarter by quarter.
Revenue from household photovoltaic power generation systems and new energy power production business increased year-on-year. In '23, the company's household photovoltaic power generation system business achieved revenue of 1.2 billion yuan, +106% year over year; gross margin was 60%, -6pct year on year. The new energy power production business achieved revenue of 300 million yuan, +117% year over year; gross margin was 60%, or -5 pct year over year. The total power generation capacity of the distributed photovoltaic power plants already in operation in 2023 was 300 million kilowatts, the grid-connected electricity capacity was 290 million kilowatts, and the electricity bill revenue was 120 million yuan; the capacity of the company's new operating household photovoltaic power generation system in 2023 was 1.55 GW. The total power generation capacity and grid-connected electricity capacity of this part of the power generation system in 23 was 950 million kilowatts, with revenue of 300 million yuan.
Profit forecast, valuation and rating: Considering that European household storage progress falls short of expectations and competition in the optical storage industry intensifies, we lowered the company's 24-25 profit forecast and added a 26-year profit forecast. The company is expected to achieve net profit of 9/10/13 billion yuan (63% down/ 66% down/increase) in 24-26. The current stock price is 25/21/17 times the 24-26 PE. As European inverter inventory levels gradually return to a reasonable range, the company's shipments are expected to continue to improve. We continue to be optimistic about the company's long-term development and maintain an “gain” rating.
Risk warning: PV installation and overseas market expansion fall short of expectations; increased competition may lead to a decline in profits.