2Q24 results fall short of our expectations

1H24's revenue was 0.339 billion yuan, +2.15% YoY, net profit attributable to mother 0.104 billion yuan, -4.74% YoY (adjusted), net profit not attributable to mother 0.097 billion yuan, or -6.89% YoY. 2Q24 revenue was 0.179 billion yuan, -12.1% YoY, +12.7% month-on-month; net profit to mother was 0.073 billion yuan, or -7.7% YoY, which fell short of our expectations. Utilization hours declined mainly due to weather, and the company issued convertible bonds, which led to an increase in financial expenses on the income statement.

Using the decrease in hours and the increase in financial expenses combined to affect profit of 18 million yuan before tax, if excluded, the company's performance in the first half of the year was +10% compared to the same period last year. According to the company's announcement, due to the influence of the rainy season, the company's equivalent power generation utilization hours in the first half of the year was about 503 hours, a decrease of 13 hours over the previous year, a reduction of about 11 million kilowatts of electricity, corresponding to a gross profit of about 7.79 million yuan. In the first half of the year, the company added 31 MW of grid connection, which is a decrease from 56 MW in the same period last year. Mainly due to the large installed capacity of the company's projects under construction, the long construction cycle of the project, and a certain delay in connecting to the grid and upgrading the new power plants. With the successive completion and acceptance of the project, the company completed connecting the 33MW self-owned power plant to the grid in July, and the cumulative increase in installed capacity this year returned to normal levels during the same period.

The company's financial expenses for the first half of the year were 44.91 million yuan, an increase of 31% over 34.34 million yuan in the same period last year. The main reason was that interest expenses on bonds were calculated according to the actual interest rate of 6.62%, which actually did not affect cash flow.

Development trends

Electricity prices in Zhejiang Province were relatively stable in 2Q24. According to the State Grid Zhejiang, electricity prices for commercial electricity buyers in Zhejiang Province (single system, general industrial and commercial 35 kv and above) were 0.774/0.761/0.716 yuan/kilowatt-hour, respectively, +2%/+0.8%/-5.8%, and +4.8%/-1.7%/-5.9% month-on-month, respectively. On a year-on-year basis, there was a slight increase in April-May and a slight year-on-year decrease in June.

Energy storage operations and product business continue to advance. According to the company's announcement, in terms of industrial and commercial energy storage business, the company will adopt a mature business strategy to promote one business strategy. The company will keep an eye on the release of relevant policies and investment returns, and further expand the industrial and commercial energy storage business. Currently, it has more than 10 MWh of project reserves; in terms of energy storage products, the company has carried out sales of household storage inverters and portable mobile power supplies in an orderly manner, and has been put on the market in small quantities to generate a small amount of trial sales revenue. As sales channels are built, the company will gradually carry out market penetration to increase the market penetration of products Shares.

Profit forecasting and valuation

Taking into account the impact of hours and financial expenses, we lowered our 2024/2025 net profit forecast by 4.3%/6.8% to 0.231/0.272 billion yuan, maintaining the outperforming industry rating, and lowering the target price by 5% to 11.5 yuan, corresponding 25/21 times P/E in 2024/2025. There is 49% room for increase compared to the current stock price. The current stock price corresponds to 16.7/14.2 times P/E for 2024/2025.

risks

Industrial and commercial electricity prices risk falling short of expectations. Installed capacity falls short of expectations, and new business expansion falls short of expectations.