Aero Energy - Aero Energy, a pioneering high-quality inverter company, was founded in 2012 and is an internationally renowned provider of photovoltaic energy storage systems and products. The company mainly targets overseas customers, and its products are sold to more than 80 countries, including Germany, the United Kingdom, the Netherlands, the United States, Australia, and Japan. As of 2023, Europe is the company's main sales area, accounting for more than 85% of revenue in 2023. The company has long focused on the field of energy storage and was one of the first inverter companies to lay out household storage. In 2023, energy storage system-related products such as energy storage inverters and energy storage batteries accounted for 76.8% of revenue. Benefiting from the explosion in European household storage demand in 2022, the company achieved revenue of 4.612 billion yuan, an increase of 454% year on year; since the second half of 2023, due to European channel inventory, the company's revenue was briefly under pressure. Annual revenue was 4.473 billion yuan, down 3% year on year.

The company's gross margin is relatively stable, and there is a negative correlation between period expenses and revenue scale, leading to obvious fluctuations in net interest rates.

Europe is nearing its end, and the pattern is uncertain

In 2022, due to the geographical conflict and energy crisis, the rise in electricity prices greatly boosted the economy of European household storage. Demand achieved explosive growth, and channel companies' preparation capacity was too large. As a result, inverters experienced channel inventory backlogs in 2023, and inverter companies' performance was briefly under pressure. However, from a fundamental point of view, demand for installed household storage in Europe will remain high in 2023, and the European household storage support policy will continue to be strengthened, which is expected to continue to support demand. It is expected that European household storage will have an installed capacity of 12.3 GWh in 2024, an increase of 30% over the previous year; installed capacity will reach 17.2 GWh in 2025, with a compound growth rate of over 35% in 2023-2025. Judging from short-term disturbances, the current inventory removal process may be nearing its end. As export data and corporate shipping conditions continue to show significant improvements, we expect that the elimination of European channel inventory may be completed in the second half of the year. In terms of the competitive landscape, the European household market is scattered. A stable competitive pattern has not yet been formed, and there is still plenty of room for improvement in the share of Chinese enterprises. Looking ahead, the household grid-connected and energy storage inverter industry may usher in a round of reshuffle, and companies with deep channel accumulation and high-quality products are expected to stand out from the fierce market competition.

European and American channels have obvious advantages, and actively expand emerging markets

The company's own brand and ODM work hand in hand, and the advantages of European and American channels are obvious. In terms of independent brands, the company has high brand awareness and market recognition in the global household energy storage field. The products have obtained many foreign certifications, and traders in Europe are rich in resources, and are expected to expand rapidly as the European market recovers. On the ODM side, the company's ODM gross margin is close to that of its own brands. The main customers are well-known global or local companies, which are deeply tied to Hanwha, and the European and American markets are expected to continue to benefit in the future. The company has outstanding technical advantages and has long focused on technology research and development in the field of energy storage. It is one of the earliest domestic enterprises to achieve integrated development of inverters and batteries, and has a number of core technologies independently developed in the field of energy storage. Currently, due to a short period of pressure on shipments, the company's sales expense ratio is higher than the industry average. Against the backdrop of continuous recovery in European demand, future sales expenses are expected to decline again as shipments increase. At the same time, the company is actively transforming the market, expanding its market layout, and expanding other markets outside Europe and America through product development and channel development. The sales area already covers Asia, Australia, Africa, Latin America and other regions, and the growth momentum is good, and it is expected to further contribute to performance growth in the future.

We expect Aero Energy to achieve net profit of 0.46 and 0.73 billion yuan respectively in 2024-2025, corresponding to PE 23 and 15 times.

Covered for the first time, giving a buy rating.

Risk warning

1. Inventory removal progress falls short of the expected risk;

2. Risk of unstable incentive policies;

3. Market competition risk;

4. Risk that profit forecasting assumptions are untrue or fall short of expectations.