Event: On April 29, 2024, the company released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating income of 6.101 billion yuan, a year-on-year increase of 3.59%, and achieved net profit of 779 million yuan to mother, a year-on-year decrease of 26.46%. In the first quarter of 2024, the company achieved operating income of 1,397 billion yuan, a year-on-month decrease of 4.29%, achieving net profit of 20 million yuan, a year-on-month decrease of 27.16%, achieving net profit deducted from non-return to mother of 0.98%, gross margin/net profit margin of 24.24%/1.45% in a single quarter, and a month-on-month change of +2.75/ -0.46 pcts.

Short-term disturbances affect profits, and the inverter can be expected to improve. Accumulation of European household energy storage products led to the industry's active removal of inverters in 2023. Affected by the industry cycle, the company sold 746,700 inverters throughout the year, down 20.76% year on year. Among them, energy storage inverters shipped about 60,000 to 70,000 units and 20 to 10,000 units in a single quarter, respectively. Affected by changes in the regional structure of shipments and mismatches in cost and price timing, the company's comprehensive gross profit margin of 21.49% in the fourth quarter was the lowest level in recent years. Although 24Q1 is a low season for storage and equipment alone, and shipments have been stable month-on-month in a single quarter, the price difference between raw materials and products has been gradually fixed, and gross margin has increased in a single quarter. Looking ahead, demand in the traditional European and American markets will recover, and the long-standing Asian, African, and Latin American markets will also usher in a harvest period. Shipments in a single quarter in the second quarter are expected to reach more than 300,000 units, and profitability will return to normal levels as the scale effect expands.

The power generation business is progressing steadily to ensure high-quality cash flow. The photovoltaic industry's favorable policy environment and declining power plant investment costs have driven the company's new energy power production business and household photovoltaic power generation system business to continue to stabilize and improve. The two sectors obtained a total revenue of 1,487 billion yuan, an increase of 108.26% over the previous year, and the gross margin remained at about 60%, showing the high quality of assets. With the strategic advantage of self-supplied inverters, by the end of 2023, the company had accumulated about 1 GW of photovoltaic power plants, including industrial and commercial distributed power plants with a good business model. In addition, the company focuses on asset burden, parallel development and circulation of power plant business, maintaining stable assets and hematopoietic capacity, and stabilizing the basic profit market.

Investment advice: The company is expected to achieve operating income of 81.54, 102.01, and 11.986 billion yuan in 2024-2026, and achieve net profit of 9.01, 11.78, and 1,439 billion yuan, up 16.4%, 29.9%, and 22.1% year-on-year. The corresponding EPS is 2.26, 2.94, and 3.59, respectively. The PE multiples corresponding to the current stock price are 24X, 18X, and 15X. We are based on the following aspects, 1) PV installation potential continues to emerge around the world in the era of affordable internet access. The company has been deeply involved in the inverter industry for many years, and the core business is expected to maintain a high trend in grid-connected inverter shipments; 2) After several quarters of adjustments, European household storage warehouses are expected to come to an end, and the gradual return of energy storage inverters will help stabilize the company's profitability at a high level; 3) The company continues to develop the photovoltaic power generation system business with self-supply of inverters and brand advantages, focusing on liquidity and asset stability Health, adding strength to get through the cycle, covered for the first time, to “increase” “Hold” rating.

Risk warning: storage and installation alone fall short of expectations, risk of fluctuating raw material costs, risk of overseas exchange, risk of increased industry competition, etc.