The company is a well-known optical storage manufacturer in the industry, focusing on European household storage. The company's main products include grid-connected inverters, energy storage inverters, energy storage batteries, etc., which are mainly used in distributed photovoltaic energy storage and grid-connected fields. Europe is the company's largest sales market, accounting for about 88% of the main business revenue in 2023.

Energy storage products contribute to the company's main revenue and are deeply involved in the European distributed optical storage market. (1) Energy storage batteries: In 2023, the company's energy storage battery revenue was 2,347 billion yuan, -6% year-on-year, accounting for 53% of revenue. Affected by European inventory pressure, the company's energy storage product shipments declined slightly in 2023, and energy storage battery shipments were 1,070 MWh, -5% compared to the same period last year. The company's energy storage battery business uses a strategy of combining outsourced batteries and self-developed battery management systems (BMS), which are mainly used in household scenarios; (2) Energy storage inverters: In 2023, the company's energy storage inverters had revenue of 1,089 billion yuan, -15%, accounting for 24% of revenue; shipped 115,300 units, or -21% of the same period. The company's energy storage inverters are mainly suitable for household energy storage, small and medium-sized industrial and commercial energy storage scenarios, with power coverage of 3.0 kW-15.0 kW; (3) Grid-connected inverters: The company's grid-connected inverters are mainly sold to Europe and other overseas regions. In 2023, the company's grid-connected inverters achieved revenue of 700 million yuan, +39% over the same period; accounting for 16% of revenue. In terms of shipment volume, in 2023, the company shipped 182,300 grid-connected inverters, which is +15% over the same period last year.

The company's grid-connected inverters cover 0.6 kW to 150 kW, which can meet the needs of household, industrial and commercial distributed photovoltaic power plants.

The optical storage industry is booming, and there is plenty of room for the company's market share to increase. Currently, Europe is the largest household market in the world. According to EESA data, the world added about 16.1 GWh of household storage units in 2023, an increase of about 100.5% over the previous year. Among them, the scale of new household storage installed in Europe was about 9.5 GWh, an increase of nearly 60% over the previous year. As module and energy storage battery prices fall, improving yield, it is expected that it will further stimulate the release of demand for optical storage. We expect that in 2025/2030, the European market space for photovoltaic inverters, energy storage inverters, and energy storage battery packs will reach 474.8-93.42 billion yuan. In addition to the household optical storage market, the EU industrial and commercial energy storage market also has huge potential. Assuming that the share of photovoltaic power generation in industry and commerce will increase to 20%-30% in the future, the corresponding photovoltaic industrial and commercial inverter space is estimated to be about 424-63.6 billion yuan; the corresponding energy storage market space (energy storage inverters, energy storage battery packs) is about 2595-389.3 billion yuan, which has huge market potential. According to our estimates, in 2023, the company's global/European household energy storage battery market share is about 7%/10%, and there is still plenty of room for improvement in the future.

By opening up other markets and complementing the product matrix, the company enters the next stage of development. On the one hand, in response to the market needs of different customers in different regions, the company has rapidly iteratively upgraded existing products and continuously improved the functions of existing products; on the other hand, the company has stepped up research and development efforts for new products, and industrial and commercial energy storage inverters, large storage and micro inverters are expected to be introduced to the market one after another in 2024. In terms of market expansion, the company actively explores markets in Africa, North America, Asia, etc., reducing dependence on the single market and ensuring the steady development of its main business. The company's expansion into the Japanese market has seen initial results, and the wholly-owned subsidiary Aero Japan has reached a product sales agreement with Sharp Energy.

Investment advice: The company focuses on the European region. Improving demand for inventory removal in Europe is expected to contribute to greater flexibility, while category development and market expansion are expected to open up incremental space. We expect the company's net profit to be 498/804/963 million yuan in 2024-2026, respectively, and the current market value corresponding to PE is 21/13/11 times, respectively. Referring to comparable company estimates, 26x PE was given in 2024, corresponding to a target price of 80.91 yuan. It was covered for the first time, and a “recommended” rating was given.

Risk warning: Risk of PV demand falling short of expectations, risk of fluctuating raw material prices, risk of increased industry competition.