Description of the event

Yuneng Technology released its quarterly report. 2024Q1 achieved revenue of 428 million yuan, a year-on-year decrease of 2% and a month-on-month decrease of 5%; net profit to mother was 0.4 billion yuan, a decrease of 66% year-on-year, and remained flat.

Incident comments

In the slightly reverse business, Q1 sales volume is expected to increase slightly from month to month. Mainly, demand in Europe and Latin America has picked up, and the North American market is still relatively lackluster. The slight inverse price is relatively stable, and gross margin is expected to remain at a good level.

Other businesses, shutters, and energy communicators are developing steadily. Quantitative profit regions are similar to slight inverse, and energy storage contributes a small amount of profit.

According to financial data, the company's expense ratio for the Q1 period was 19.4%. Considering the scale effect, the overall cost ratio was at a reasonable level. Among them, the financial expense ratio was 1.1%, mainly due to exchange rate fluctuations, which caused the company to incur certain exchange losses, hedging interest income. At the end of Q1, the company's inventory was 1.4 billion, down 10% from the previous month, returning to the 2022/Q4 level, reflecting the continued decline in the company's overseas warehouse inventory. Additionally, Q1 experienced asset impairment losses of $16 million, or due to inventory depreciation losses.

Looking ahead to the future, the company's demand is at an inflection point, and industrial and commercial savings are worth looking forward to. The company's Q2 shipments are expected to increase month-on-month, and inventory is expected to be reduced to a reasonable level by the end of Q2. The company's upward trend is clear from quarter to quarter throughout the year. Shipments are expected to increase year over year, and profitability is expected to be at a stable level. At the same time, the company actively lays out the energy storage business. Industrial and commercial storage revenue is expected to more than double in 2024, and household storage is also expected to achieve a breakthrough.

We expect the company to achieve a profit of 370 million in 2024, corresponding to PE 21 times. Maintain a “buy” rating.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.