1H24 results fall short of our expectations
The company's 1H24 revenue was 1.431 billion yuan, up 29.8%, net profit to mother was 0.181 billion yuan, up 0.02%, after deducting 0.173 billion yuan in non-net profit and 1.77%; of these, 2Q24 revenue was 0.832 billion yuan, up 27.1%, up 38.8%, and net profit to mother 0.115 billion yuan, down 3.1% and 73.6%, after deducting non-net profit of 0.114 billion yuan, up 0.1 billion yuan % and the environment increased by 89.9%. The company's 1H24 performance fell short of our expectations due to the slope of the new factory in Suzhou and weak demand for overseas industrial and commercial storage.
Development trends
The charging business continues to grow at a high rate, and gross margin remains high. The company's 1H24 charging business revenue was 0.556 billion yuan, +44.8% year-on-year, with a gross profit margin of 38.07%, and a slight year-on-year decline; among them, we estimate that 2Q24 revenue was about 0.32 billion yuan, an increase of 41% +, with a gross margin of about 37-38%; overall, the company's charging pile business continued to grow strongly. Although gross margin declined, it remained at a high level; we analyzed that the high growth of the company's 1H charging pile business mainly benefited from the high prosperity of the domestic market. Also, the impact of the slowdown in electrification of car companies and the slowdown in charging pile construction also affected the apparent profit level of the charging business (high overseas gross margin). Looking ahead, 2H charging piles have entered the peak delivery season, superimposed policy subsidies (pilot projects to repair shortcomings in county charging and switching facilities) have gradually been implemented, and tenders from major customers such as car companies and Sinopec have been launched. We are optimistic that the company's charging pile business will continue to grow well.
The growth rate of the energy storage business has slowed, and gross margin may have stabilized in 2Q24. The company's 1H24 energy storage business earned 0.465 billion yuan, +19.6% year over year, gross profit margin of 30%, year over year -5.6ppt, mainly affected by weak demand for overseas industrial and commercial storage and domestic PCS price wars. However, looking at 2Q24, with the recovery in domestic energy storage demand and the gradual stabilization of PCS prices after the holiday season, and the energy storage business improved month-on-month, we estimate revenue to be about 0.25 billion yuan, an increase of 20.9%, and gross margin may be close to 31%, recovering month-on-month. Looking ahead to 3Q24, we expect domestic demand for large reserves to maintain a high level of prosperity and increase month-on-month, while the recovery in overseas commercial and commercial storage demand will still await the inflection point of US interest rate cuts. PCS prices stabilize, and gross margin is expected to remain stable.
The decline in new plants, exchange gains and losses, and accrual impairment dragged down profit performance year over year. The year-on-year profit performance of 1H24 was also hampered by the following: 1) the Suzhou plant is still climbing, generating losses of about 24-25 million yuan; 2) positive exchange earnings fell by about 8.2 million yuan over the same period; 3) deducted impairment: 1H24 accrued assets+credit impairment losses were 0.016 billion yuan, and 1H23 was about 0.011 billion yuan.
Profit forecasting and valuation
Considering the impact of overseas industrial and commercial storage shipments falling short of expectations and the impact of the Suzhou factory climbing, we lowered the company's 2024/2025 profit forecast by 14.1%/8.3% to 0.437/0.581 billion yuan; compounding the decline in the energy storage industry valuation center, we lowered the target price by 25.8% to 28.8 yuan to maintain the outperforming industry rating. The current stock price corresponds to 14.5x/10.9x P/E 2024/2025, and the target price corresponds to 2024/2025 20.6x/15.4x P/E, which is 41.3 % upstream space.
risks
China's charging pile construction fell short of expectations, global energy storage installations fell short of expectations, and market competition intensified.