Core views

The company released its 2023 annual report and 2024 quarterly report. The 2023 annual report's revenue and performance exceeded the median previously forecast. The 2024 quarterly report's revenue and performance exceeded market expectations.

The company leverages its advantages in the photovoltaic and energy storage business. Photovoltaic inverters have entered the European, Middle East and US markets, received orders for PCS products from the US, and relied on PCS to develop domestic system integration business. Looking ahead to 2024, the company's photovoltaic and energy storage business is expected to continue to expand. Markets such as the Middle East, Europe, and the US are expected to develop rapidly, and profitability can be maintained or improved as overseas share increases and R&D continues to iterate.

occurrences

The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 4.933 billion yuan, an increase of 110.9%; achieved a return of 286 million yuan, an increase of 250.5% over the previous year; and achieved deducted non-performance of 276 million, an increase of 295.2% over the previous year. In the first quarter of 2024, we achieved revenue of 711 million yuan, an increase of 14.7% year on year; achieved return performance of 51 million yuan, an increase of 39.9% year on year; achieved deducted non-performance of 47 million, an increase of 46.9% year on year.

Brief review

The revenue and performance of the 2023 annual report exceeded the median forecast, and the 2024 quarterly report exceeded market expectations

Earlier, the forecast was for 2023 revenue of 45-50 billion yuan, with a return of 250-310 million yuan, and deducted non-performance of 24—30 million. The median values were 4.75 billion, 280 million, and 270 million, respectively. Actual revenue, performance, and deducted non-performance all exceeded the median forecast. In the first quarter of 2024, net earnings and net profit increased by 40% or more year on year, gross margin increased 4.41 pct year on year, and net margin increased 1.22 pct year on year, exceeding market expectations.

The photovoltaic business increased year-on-year, and overseas markets continued to break through

The company's photovoltaic inverter business achieved revenue of 2,879 billion yuan in 2023, a year-on-year increase of 135.13%, gross profit margin of 20.25%, and a year-on-year increase of 0.61 pct. The company's photovoltaic business grew rapidly. On the one hand, thanks to the addition of 216.9 GW of PV installed capacity in China last year, an increase of 148% over the previous year, the company is a leading enterprise in centralized photovoltaic inverters and ground power plant inverters in China. According to the company's annual report, the company's sales volume of photovoltaic inverters reached 23.47 GW in 2023, an increase of 132.65% over the previous year, which is basically in line with the growth rate of PV inverters revenue, which means that the average unit price remains stable. In terms of overseas markets, the company's ground power plant inverters have completed the layout of major global photovoltaic market countries including the United States, Europe, the Middle East, India, and Southeast Asia, and have completed distributed product certification in major European countries. The company's performance in Q1 2024 grew faster than revenue growth, and gross profit margin and net margin increased significantly year-on-year, which is expected to be due to the high growth rate of overseas photovoltaic business. Domestic household inverters have achieved large-scale sales by platform vendors, and breakthroughs in industrial and commercial inverters will also be achieved this year. The company will focus on anchoring the optical storage business in Europe, the Middle East, North America, Southeast Asia, Brazil and other markets on the basis of continued growth in the Chinese and Indian markets.

Energy storage maintains market leadership, and volume and profit increase

The company's energy storage business achieved revenue of 1,927 billion yuan in 2023, with a year-on-year increase of 88.6%, gross profit margin of 16.17%, and a year-on-year increase of 3.81 pcts. According to the EESA Energy Storage Leaders Alliance statistics, the company ranked first in the country in 2021, 2022, and 2023 in 2021, 2022, and 2023, according to the “ranking of Chinese companies' domestic energy storage third party high-power PCS215kW or more”. The increase in gross margin may be related to the increase in the share of PCS and the increase in stand-alone power. In overseas markets, the company's high-power energy storage PCS products have received multiple 100 MW project orders in the North American market. According to data from the Energy Administration, by the end of 2023, the cumulative installed capacity of new energy storage projects built and put into operation nationwide reached 31.39 GW/66.87 GWh, and the new installed capacity in 2023 was about 22.6 GW/48.7 GWh, an increase of more than 260% over the end of 2022; by the end of the first quarter of 2024, the cumulative installed capacity of new energy storage projects built and put into operation nationwide reached 35.3GW/77.68 GWh, an increase of more than 12% over the end of the first quarter of 2023. Based on this calculation, the 2024Q1 added a new type of energy storage installed at 3.91 GW/10.81 GWh. The domestic energy storage market is developing rapidly, driving the company's energy storage PCS and energy storage system integration business to grow rapidly.

Focus on R&D and product iteration, and guarantee gross margin

In the field of photovoltaic inverters, the company has centralized inverters and string inverters. String inverters can provide 3-350kW full-power range products, achieving a wide range of power coverage. Centralized inverters can provide 2,500 to 8800 kW power range products. All products achieve high conversion efficiency greater than 99%, high protection level, and high reliability design to meet the needs of various application scenarios. Energy storage products can provide AC energy storage converters, DC energy storage converters and integrated energy storage systems. AC energy storage converters have a full power range of 125 to 8000 kW, and are used in multi-purpose applications such as power generation, transmission, distribution, grid side and microgrids. The DC energy storage converter uses a 182 kW modular design and can be extended to MW systems. The product uses silicon carbide power devices, which are suitable for the transformation and upgrading of newly built photovoltaic power plants and existing existing photovoltaic power plants.

In terms of research products, they include high-power modular centralized inverters, 3.6MW centralized inverters, 1500V-320kW string inverters, 1100V-125kW string inverters, 1500VDC-1.75MW energy storage inverters, 1.25MW energy storage inverter projects, 1500V-215kW medium power energy storage converters, household storage all-in-one machines, etc. The solution covers applications such as centralized ground power stations, household, industrial and commercial power stations, large-scale energy storage power stations, industrial and commercial energy storage, and household energy storage. The iterative cost reduction of products is expected to be an important measure for the company to maintain gross margin. In 2023, the company's overall gross margin increased by 1.94 pct, of which the photovoltaic business increased 0.6 pct and the energy storage business increased by 3.8 pcts. It is expected to be due to the iterative cost reduction of photovoltaics and energy storage products and an increase in overseas share. The gross margin of 2024Q1 has reached 23.55%, up 4.4 pct year on year, 4.3 pct month on month, and the company's operating quality continues to improve.

Investment recommendations and performance forecasts

The company is a leading domestic centralized photovoltaic inverter and energy storage PCS. The company has entered the European terrestrial photovoltaic market and the US large storage market, and is expected to continue to create good performance in the context of continuous growth in domestic and overseas photovoltaics and energy storage. The company's net profit for 2024 and 2025 is estimated to be $549 million and 770 million, respectively.

Risk analysis

1) Demand side: The growth rate of installed domestic energy storage fell short of expectations, and the growth rate of new energy investment declined; overseas energy storage demand fell short of expectations, and overseas carbon neutrality progress was slowing down.

2) Supply side: The supply of power electronic devices such as IGBTs is tight, and the progress of localization falls short of expectations; prices and processing costs of raw materials such as copper, aluminum, and steel have risen.

3) Policy aspects: Support policies related to energy storage fell short of expectations; compensation standards for capacity electricity prices fell short of expectations; electricity spot market progress fell short of expectations; electricity peak and valley price differences fell short of expectations.

4) In terms of the international situation: international trade barriers have deepened, exports have been blocked; local production requirements have increased and costs have risen; international conflicts have led to rising shipping costs and extended delivery times.

5) Market side: Increased competition has led to lower gross profit margins and profitability of energy storage batteries, integrators, and PCS manufacturers than expected; the company's market competition strategy is wrong.