Description of the event

Goodway released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 7.353 billion yuan, up 56% year on year; net profit to mother of 852 million yuan, up 31% year on year; 2023Q4 achieved revenue of 1.702 billion yuan, down 5% year on month, down 7% month on month; net profit to mother - 41 million yuan, down 111% year on year, down 127% month on month; 2024Q1 achieved revenue of 1,126 million yuan, down 34% month on month; net profit to mother - 29 million yuan, year on year Decreased by 109%, up 29% month-on-month.

Incident comments

Inverter sales were high and low in 2023. The company sold 686,300 inverters throughout the year, of which 532,200 were connected to the grid, up 15% year on year, 154,400 energy storage units, down 32% year on year; 443,600 overseas units and 242,700 domestic units.

Battery sales volume is 341 MWh, and household distributed system sales volume is 513 MW. The company performed well in the first half of the year. The second half was affected by European inventories, and shipments of energy storage and other products fell short of expectations.

Profitability performance was stable in 2023. In terms of gross margin, grid-connected inverters are 29.43%, energy storage inverters are 55.83%, energy storage batteries 24.96%, and household systems are 12.94%. The gross margin of energy storage inverters and energy storage batteries increased year-on-year, and remained relatively stable throughout the year. By market, the gross margins of inverters and energy storage battery products in Europe, Oceania, America, and China were 45.4%, 34.1%, 38.0%, 33.6%, and 10.5%, respectively.

2024Q1, the company's energy storage inverter sales are low, mainly because European household storage inventory pressure is still under pressure. In terms of profit level, the company's comprehensive gross profit margin was 27.5%, which declined from month to month, mainly due to changes in the revenue structure. The share of revenue from household systems with low gross margins increased markedly.

According to financial data, the company's expense ratios for the 2023Q4 and 2024Q1 period were 20.0% and 29.2% respectively, which is at a historically high level. This is mainly due to poor scale effects and the company's continuous increase in R&D investment. At the end of 2024Q1, the company's inventory reached 2.26 billion, an increase of 16% over the previous month, and net operating cash flow of 710,000 million. The main reason was the expansion of the household systems business scale, which can later be converted into revenue growth.

Looking ahead, the company's various businesses are improving quarter by quarter, and the inflection point of demand is clear: 1) On-hand orders for grid-connected inverters have improved markedly, and annual shipments have increased compared to previous expectations. Domestic and overseas markets are each expected to account for half. 2) Energy storage inverters. It is expected that European inventories will be removed by the end of the second quarter, and demand is expected to return to normal. In addition, off-grid demand from Australia, Southeast Asia, and Brazil has increased, contributing more growth. 3) Battery products are growing at a higher rate with the volume of industrial and commercial storage. 4) Household systems are expected to maintain rapid revenue growth this year.

We expect the company to achieve net profit of 700 to 1.1 billion yuan in 2024-2025, corresponding to PE 25 and 16 times, respectively. Maintain a “buy” rating.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.