Operating income increased slightly in the first half of 2024, and net profit to mother declined year over year. With 2024H1, the company achieved revenue of 0.339 billion yuan (+2.15%) and net profit of 0.104 billion yuan (-4.74%) to mother. Among them, single-quarter revenue for the second quarter was 0.179 billion yuan (-12.11%), and net profit to mother was 0.073 billion yuan (-7.68%). The reason for the decline in the company's operating income in the second quarter was due to the year-on-year increase in the number of rainy days and length of time, and the number of photovoltaic power generation units decreased; 2024H1, the equivalent number of hours generated by the company's own power plants was about 503 hours, a decrease of 13 hours over the previous year. Based on estimates based on the installed capacity of self-owned power plants and the average comprehensive electricity price of the company's photovoltaics, the decrease in the number of hours of equivalent power generation led to a reduction in the number of hours of use; in addition to the year-on-year decline in the number of hours of use, convertible bonds also generated less electricity by 11 million kilowatt-hours; in addition to the decline in the number of hours used, the company's net profit to the mother was also affected by the year-on-year decline in the number of hours used, and the increase in financial expenses also contributed to the net increase in the number of hours of use. Profits declined year over year.

The installed capacity of distributed photovoltaics continues to increase, and the company's performance is expected to grow steadily. As of 2024H1, the company has accumulated a total grid-connected capacity of about 859 MW of distributed photovoltaic power plants, added 31 MW of distributed photovoltaic installed capacity in the first half of 2024, an increase of 3.74% over 828 MW in 2023. There are also about 152 MW of self-owned distributed photovoltaic power plants under construction, to be built, and to be contracted. The gradual operation of distributed photovoltaic projects in the future ensures steady growth in the company's performance.

The energy storage business is gradually being implemented, and it may become a new profit growth point in the future. Based on distributed customers, the company combines technical application scenarios such as charging piles, energy storage, microgrids, virtual power plants, etc., to construct a two-wheel drive energy storage business development pattern of “industrial and commercial energy storage operation+household energy storage product development and manufacturing”. In terms of industrial and commercial energy storage operations, the company is steadily promoting industrial and commercial energy storage operations, and currently has a project reserve of more than 10 MWh. In terms of the energy storage product business, the company has carried out sales of household storage inverters and portable mobile power banks in an orderly manner. It has been put on the market in small batches, generating a small amount of trial sales revenue. As sales channels are built to accept more sales orders, the product market share will gradually increase.

Risk warning: Electricity consumption is falling; electricity prices are falling; distributed photovoltaic projects are falling short of expectations.

Investment advice: Lower profit forecasts due to lower utilization hours and increased financial expenses. Net profit for 2024-2026 is expected to be 0.231/0.276/0.314 billion yuan respectively (the original forecast value was 0.273/0.337/0.39 billion yuan), with year-on-year growth rates of 5.1%/19.1%/13.9%, EPS 0.46/0.55/0.63, respectively, and PE corresponding to the current stock price is 16.7/14.0/12.3, respectively. The company was given 18-20 times PE in 2024, corresponding to a target market value of 4.2-4.6 billion yuan, corresponding to a reasonable value of 8.33-9.26 yuan/share. There is 8%-20% premium space compared to the current stock price, maintaining a “superior to the market” rating.