Description of the event
Hemai Co., Ltd. released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2,026 million yuan, a year-on-year increase of 32%; net profit to mother of 512 million yuan, a year-on-year decrease of 4%; among them, 2023Q4 achieved revenue of 618 million yuan, an increase of 3% year-on-year and an increase of 80% month-on-month; and net profit to mother of 96 million yuan, a year-on-year decrease of 43% and a month-on-month increase of 44%. 2024Q1 achieved revenue of 331 million yuan, down 43% year on year and 46% month on month; net profit to mother was 67 million yuan, down 62% year on year and 30% month on month.
Incident comments
In 2023, the company's micro reverse and DTU achieved revenue of 1.41 billion yuan, of which micro reverse sold about 1.32 million units, an increase of 13% over the previous year, and DTU sold about 240,000 units. Among them, Q4 expects slightly negative sales to remain flat month-on-month. Mainly, inventory pressure in Europe is still high, and improvements in Latin America are limited. Structurally, Europe, North America, and Latin America accounted for 60%, 14%, and 13% of the company's total revenue in 2023. Demand in North America and Latin America was lackluster due to interest rates and policies, and Europe's share increased. In terms of profitability, the gross profit margin was slightly reversed by 50.3% for the whole year, an increase of 0.5 pct over the previous year, and the quarterly gross margin trend was relatively stable. Furthermore, the company's energy storage achieved explosive growth, mainly from large storage, with annual revenue of 310 million, mainly concentrated in Q4. The related subsidiary Qinghe New Energy contributed 5.35 million in profit; distributed system revenue was 160 million, with a gross profit margin of 55%, an increase of 23 pcts over the previous year, mainly due to the excellent profitability of some projects.
2024Q1's slight reversal and DTU shipments are expected to increase slightly month-on-month. The increase is mainly due to reduced inventory pressure in Europe and lower Latin American rates driving demand. It is expected that the April-June order growth trend will remain clear, and the company's demand has broken out of an inflection point. The Q1 company's comprehensive gross margin remained around 50%, and the gross margin was relatively stable. Q1 is the low season for the company's distributed photovoltaic systems and heavy storage, contributing less to revenue and profit.
According to financial data, the company's expense ratio during 2023 was 19.21%, a sharp increase over the previous year. The first reason was that the company increased R&D investment, with annual R&D expenses of nearly 250 million yuan, which more than doubled from the previous year; second, demand was relatively lackluster, and sales management expenses increased; and third, interest income decreased. The cost rate during the 24Q1 period was 32.52%, and the dilution effect was weak in the off-season context.
Inventory at the end of Q1 was 840 million, up 14% from the previous month. Mainly, the company is optimistic about the development of energy storage this year and is increasing its preparation efforts. In fact, inventory is expected to decline slightly.
Looking ahead, the company slightly reverses the inflection point, and energy storage may continue to double its growth. In the micro-inverse business, the elimination of European channel inventory is expected to be completed at the end of Q2. Previously, demand is expected to increase month by month, Q2 shipments are expected to increase significantly month-on-month, and Q3-Q4 is rising quarter by quarter.
In the energy storage business, annual revenue is expected to double year-on-year. Based on the expansion of the domestic market overseas, household storage and commercial storage are also at an active stage.
We expect the company to achieve profits of 700 million yuan and 900 million yuan respectively in 2024-2025, corresponding to PE of 30 and 22 times. Maintain a “buy” rating.
Risk warning
1. Deterioration of the competitive landscape;
2. PV installation falls short of expectations.