Incidents:
On April 28, 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%, achieved net profit of 779 million yuan, a year-on-year decrease of 26.46%, achieved net cash flow from operating activities of 383 million yuan, a year-on-year decrease of 60.17%, a gross sales margin of 32.38%, a year-on-year decrease of 1.14 pcts, and the unit profit level was basically stable.
2024Q1 achieved operating income of 1,397 billion yuan, -15.56%/-4.29% YoY, net profit to mother of 20 million yuan, -93.74%/-27.15% YoY/M respectively, and achieved gross sales margin of 24.24%, and -12.45 pct/y +2.75pct, respectively.
The overseas inventory removal cycle affected shipments. In 2023, the company's grid-connected inverter business achieved operating income of 4,064 billion yuan, an increase of 1.53% year-on-year, and a gross profit margin of 21.63%, a year-on-year decrease of 5.80pct; the energy storage inverter business achieved operating income of 439 million yuan, a year-on-year decrease of 58.91%, achieving a gross profit margin of 37.08%, an increase of 2.75pcts year-on-year. During the same period, the company shipped a total of 746,700 units of photovoltaics and energy storage inverters, a year-on-year decrease of 20.76%. Due to the high backlog, new demand declined compared to expectations during the reporting period. Inverter shipments were under pressure, and export sales revenue declined; in order to maintain market competitiveness, the company moderately reduced prices for domestic inverter products, which led to a decline in related gross margin.
The operating scale of distributed power plants grew rapidly, and the household photovoltaic system business developed rapidly. In 2023, the company's new energy power production business achieved revenue of 293 million yuan, a year-on-year increase of 117.06%, achieving a gross profit margin of 60.03%, a year-on-year decrease of 5.37 pcts, and the household photovoltaic power generation system business achieved operating income of 1,194 billion yuan, an increase of 106.19% year-on-year, achieving a gross profit margin of 59.90%, a year-on-year decrease of 5.57 pcts. By the end of 2023, the company's distributed photovoltaic power plants had a cumulative installed capacity of 1186.71 MW, a significant increase compared with 295.79 MW at the end of 2022; in 2023, the company added 1547.74 MW of operating household photovoltaic power generation systems. The company's new energy power production business and household photovoltaic power generation system business continue to be stable and improving.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 76.9/90.5/10.09 billion yuan respectively, with year-on-year growth rates of 26.1%/17.6%/20.5%, net profit to mother of 9.8/13.0/ 1.62 billion yuan respectively, 25.1%/33.2%/24.9%, EPS 2.43/3.24/4.05 yuan/share, respectively, and a 3-year CAGR of 27.7%. The company's 2023 performance was mainly affected by overseas inventory backlogs and increased competition. As the inventory removal cycle comes to an end, shipments are expected to improve in 2024. Referring to comparable company valuations, we gave the company 26 times PE in 2024, with a target price of 63.28 yuan, downgraded to an “increase in holdings” rating.
Risk warning: PV installed capacity growth falls short of expectations; industry competition intensifies; market development falls short of expectations.