Incidents:

The company publishes an annual report for 2023 and a report for the first quarter of 2024.

In 2023, the company achieved total operating income of 7.353 billion yuan, a year-on-year increase of 56.10%; net profit attributable to shareholders of listed companies of 852 million yuan, an increase of 31.24%; net cash flow from operating activities of 1,034 billion yuan, an increase of 18.25% over the previous year; and basic earnings per share of 4.94 yuan/share, an increase of 31.38% year on year. The company plans to distribute a cash dividend of 7.5 yuan (tax included) to all shareholders for every 10 shares, and plans to transfer 4 shares for every 10 shares in capital reserve to all shareholders.

In the first quarter of 2024, the company achieved total revenue of 1,126 billion yuan, a year-on-year decrease of 34.50%; net profit attributable to shareholders of listed companies - 288.215 million yuan, a year-on-year decrease of 108.57%.

Comment:

Inventory accumulation in the energy storage inverter industry dragged down the company's short-term performance. The company has related core technologies in the fields of power electronics, new energy control, energy management, energy storage conversion, massive data collection and storage, and application. Its main business products include photovoltaic grid-connected inverters, photovoltaic energy storage inverters, energy storage batteries and household systems. The company's annual revenue and net profit grew steadily in 2023, but on a quarterly basis, in the fourth quarter of 2023, the company achieved total operating income of 1.702 billion yuan, a year-on-year decrease of 5.14%; net profit attributable to shareholders of listed companies was 32 million yuan, a year-on-year decrease of 108.76%. The main reason for the decline in the company's performance in 2023 is due to the high inventory of energy storage inverters in the European market, high and low market demand, and the decline in sales of the company's energy storage inverters. However, the continued downward trend in the company's performance in the first quarter of 2024 has not changed. The main reason is that the share of export revenue, which is relatively high with a relatively high gross margin, has declined sharply.

The company has steady sales of grid-connected inverters and launched new products suitable for more application scenarios. The company's grid-connected inverters are all string inverters. The products are used in various scenarios such as homes, roofs, farms, photovoltaic power plants, etc., and the power range covers the range of 0.7kw-320kw. In 2023, the company sold 532,200 grid-connected inverters, up 15.46% year on year, achieving operating income of 2,861 billion yuan, up 42.99% year on year, gross profit margin 29.43%, and a decrease of 0.46 percentage points year on year. The company's grid-connected inverter revenue growth is mainly driven by market demand, increased sales and increased stand-alone power. In 2023, the company released the new UT series and GT series of grid-connected inverters. Among them, the UT series can adapt to complex terrain to increase power generation, can adapt to various harsh environments, and has the characteristics of intelligent heat dissipation, safety, and long life. The GT series has an ultra-high power density, 20% reduction in size, 15% weight reduction, and a maximum conversion efficiency of 99%. In 2024, the company's grid-connected inverter business is expected to maintain a good sales growth rate with the rapid growth of installed capacity in emerging markets and steady demand in Europe and China.

Energy storage inverters are clearly affected by overseas market inventories and are waiting for inventory to be digested. In 2023, the company's photovoltaic energy storage inverters achieved sales volume of 154,400 units, a year-on-year decrease of 32.20%. The operating income of energy storage inverters was 1,566 billion yuan, a year-on-year decrease of 4.67%, and a gross profit margin of 55.83%, an increase of 11.33 percentage points over the previous year. In 2023, the company's energy storage inverters were affected by high inventories in Europe, product sales declined, and the inventory is currently being rapidly digested. It is expected that with the release of demand in off-grid regions such as Australia, Southeast Asia, and Brazil, demand in the energy storage inverter market is expected to recover. In addition, the company has launched new products such as 60 kWh outdoor integrated cabinets and 100 kWh to 372 kWh outdoor energy storage cabinets, which can be flexibly expanded according to customer needs, and can be applied to various industrial and commercial application scenarios such as industrial parks and commercial complexes.

The company caters to the rapid growth of the household market, and its household photovoltaic systems have made rapid progress. Household photovoltaics refers to small photovoltaic power plants where photovoltaic panels are placed on the roof or courtyard of a family house. The company's holding subsidiary, Yude New Energy, actively lays out distributed household photovoltaic power generation systems and supplies three-piece sets including inverters, photovoltaic modules and distribution boxes. In 2023, distributed photovoltaics in China added 96.29 GW of installed capacity, an increase of 88.4% over the previous year, while household photovoltaics accounted for more than 40%. In 2023, the company sold 513.28 MW of household systems, achieving revenue of 1,654 billion yuan, an increase of 688.92% over the previous year, and a gross profit margin of 12.94%, an increase of 2.61 percentage points over the previous year. After the price of photovoltaic modules has been drastically reduced, household photovoltaics have good economic benefits, and the market is expected to maintain a rapid growth trend.

The company has a perfect sales network to expand overseas sales and enhance the company's profitability.

In 2023, the company's domestic revenue was 2,968 billion yuan, an increase of 212.94% over the previous year, and significant progress was made in domestic market sales. However, the gross margin of the domestic market business was only 12.41%, down 0.96 percentage points from the previous year, reflecting the characteristics of intense regional competition. The company has a complete global product sales network, continues to expand overseas markets for photovoltaics, and sells products in batches to the Netherlands, Australia, Italy, Sweden, Spain, the Czech Republic and other overseas regions. In 2023, the company achieved overseas revenue of 4.329 billion yuan, a year-on-year increase of 15.71%, and a gross product margin of 43.25%, an increase of 6.13 percentage points over the previous year. Looking at the subregions, sales revenue in the European market was 3.344 billion yuan, gross profit margin of 45.42%, Oceania sales revenue of 524 million yuan, gross profit margin of 34.12%, America 185 million yuan, gross profit margin 37.95%, and other regions of 148 million yuan, gross profit margin of 33.64%. The company's overseas business is expected to grow steadily in 2024 as inventory is digested in the European market and demand in emerging markets grows.

Investment advice: The company's net profit attributable to shareholders of listed companies in 2024, 2025, and 2026 is estimated to be 707 million yuan, 880 million yuan and 1,116 million yuan, respectively, with corresponding earnings per share of 4.09, 5.09, and 6.45 yuan/share. Based on the closing price of 103.60 yuan/share on May 10, the corresponding PE is 25.35, 20.36 and 16.05 times, respectively. The company's multiple business lines, such as grid-connected inverters, energy storage batteries, and household photovoltaic systems, and domestic and foreign markets are developing rapidly. Despite fluctuations in short-term performance, there is broad scope for long-term development, maintaining the company's “increase” investment rating.

Risk warning: risk of changes in international trade policies; risk of global installed capacity demand falling short of expectations; risk of industry competition becoming fierce and profitability declining.