Shenghong Co., Ltd. announced results for the first quarter of 2024. On April 24, the company announced its results for the first quarter of 2024. 2024Q1 achieved operating income of 599 million yuan, a year-on-year increase of 33.8%, after deducting non-net profit of 59.83 million yuan, a year-on-year increase of 5.04%. The net profit growth rate was lower than the revenue growth rate mainly due to the increase in depreciation and amortization expenses after the transformation of the Suzhou factory in the fourth quarter of last year, and the corresponding three-fee increase dragged down profit margins; the company's gross profit margin for the first quarter was 39.54%, up about 1 pct from month to month, and a net profit margin of 10.97%. By sector, the company's energy storage business achieved revenue of about 211 million yuan in the first quarter, up 26% year on year, charging pile business achieved revenue of about 231 million yuan, up 48% year on year, industrial power supply revenue of about 96 million yuan, up 26% year on year, and battery testing and chemical equipment achieved revenue of 56 million yuan, up 26% year on year. The company's performance was in line with expectations.
Overseas market growth is slowing, and the 2024 growth of the energy storage business is expected to be driven by the domestic market. In 2023, the company's energy storage business achieved revenue of about 910 million yuan, an increase of 256%. Shipments are expected to be around 5GW, of which overseas revenue exceeds 400 million yuan, and shipments are about 1 GW. The US accounts for 50% of the overseas market and Europe accounts for 30%. The growth rate of 2024Q1 overseas markets is slowing down. The company expects overseas energy storage to maintain 30% growth throughout the year. The increase is mainly in US storage, while domestic large storage revenue in the first quarter achieved a year-on-year growth rate of more than 2 times that of the same period last year. The domestic revenue growth rate of the energy storage business is expected to be over 70% throughout the year.
Overseas demand is relatively sluggish, and the charging pile business is seeking new growth points. In 2023, the company's charging pile business achieved revenue of about 850 million yuan, an increase of 99% over the previous year. The company expects the charging pile sector to maintain a growth rate of more than 40% in 2024, with an overseas share target of 20% for the whole year. Currently, the company accounts for a relatively small share of overseas revenue. In the context of macroeconomic pressure and a gradual slowdown in government investment, overall demand is relatively sluggish. US market orders are expected to be gradually realized in the second quarter, and there will be significant revenue growth in the second half of the year; domestic revenue is the main source of growth for the sector. The company's traditional main business has yet to show a clear marginal inflection point, and the company expects the sector to grow at an annual rate of more than 10%.
Investment advice: Due to oversupply and intense market competition, we have lowered our profit forecast. We expect the company to achieve operating income of 35.22/46.81/5.840 billion yuan in 2024-2026; achieve net profit of 5.12/6.32/804 million yuan (the original net profit forecast for 24/25 was 6.3/852 million yuan). At the same time, considering the company's sufficient new orders, the shipping structure is expected to continue to improve. The company will be given 27 times PE in 2024 (originally 22x), with a target price of 44.88 yuan, maintaining a “superior to the market” rating.
Risk warning: New energy related industrial policy changes; energy storage industry demand falls short of expectations