Description of the event

Jinlang Technology released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 6.101 billion yuan, a year-on-year increase of 4%; net profit to mother of 779 million yuan, a year-on-year decrease of 26%; 2023Q4 achieved revenue of 1,459 million yuan, a year-on-year increase of 5%; net profit to mother of 0.28 billion yuan, down 92% year-on-year and 78% month-on-month; and 2024Q1 achieved revenue of 1.397 billion yuan, a year-on-year decrease of 4%; net profit to mother of 0.2 billion yuan, a year-on-year decrease of 94%. The year-on-month decline was 27%.

Incident comments

In 2023, the company sold 750,000 inverters, a year-on-year decrease of 21%; in terms of revenue structure, overseas and domestic inverters are expected to account for about half. Looking at Q4 alone, the company's shipments are expected to continue to perform lackluster. In terms of profitability, the profitability of the company H2 began to decline, domestic profits connected to the grid were under pressure, and overseas were also affected by high costs and price mismatches. The gross margins of grid connection and energy storage for the whole year were 21.6% and 37.1%, respectively, -5.8pct and +2.8pct year-on-year. In addition, in 2023, the company's power plants and power generation business contributed nearly 1.5 billion dollars in total revenue, with a gross profit margin of about 60%.

Demand for 2024Q1's grid-connected inverters continues to improve, domestic demand in regions such as Asia, Africa and Latin America continues to improve, and energy storage inverters are expected to remain at a low base. The Q1 gross margin of the company's inverter business is expected to improve month-on-month. The reason for its grid-connected inverters in China is still low due to a mismatch between high raw material costs and prices. The cost rate for the Q1 period was 22.6%, +2pct month-on-month, mainly due to poor scale effects. In addition, the low revenue and gross margin of Q1 power plants during the low season also affected profit performance.

Looking ahead, the company's Q2 profit trend is positive. As demand for grid-connected connections improves in Europe, Southeast Asia, Latin America, etc., Q2 shipments are expected to increase sequentially. At the same time, thanks to an increase in overseas share and a drop in raw material prices, the company's Q2 gross margin level is likely to continue to recover. The power plant and power generation business contribute steadily to revenue and profits to support the company's performance.

We expect the company to achieve profit of 960 million yuan or 1.22 billion yuan in 2024-2025, corresponding PE 23 to 18 times.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.