1H24 results slightly lower than market expectations

The company announced 1H24's performance: 1H24's revenue was 1.891 billion yuan, the year-on-year net profit was 0.219 billion yuan, and the year-on-year net profit was -56.2%; of these, 2Q24 earned 1.06 billion yuan, -25.3% /month-on-month +27.6%, net profit to mother 0.095 billion yuan, -64.4% y/month-on-month -23.2%, 1H24's performance was slightly lower than market expectations, mainly due to the slow departure of downstream customers from accounts.

Development trends

The energy storage business is under pressure, and we are waiting for the inflection point of downstream storage. By business, 1) Energy storage business: We expect 1H24 energy storage business revenue to be about 0.14 billion yuan, of which 2Q24 revenue will exceed 50 million yuan, mainly affected by slow downstream storage in Europe, and the sharp decline in energy storage business shipments over the same period last year. 2) Data center sector:

The 1H24 data center business revenue was 1.23 billion yuan, which was basically the same year on year. The gross profit margin was 35.8%, the year-on-year decrease was 2.2 ppt, and the overall data center business maintained steady growth. 3) PV inverters: We expect 1H24 PV business revenue to be about 0.42 billion yuan, a year-on-year increase of more than 40%, mainly due to the rapid growth in domestic PV installed capacity. 4) Charging pile business: We estimate that 1H24 charging pile business revenue exceeds 60 million yuan, an increase of 10% + over the previous year. As charging piles gradually enter the peak delivery and inspection season in the second half of the year, we believe orders are expected to be fulfilled at an accelerated pace.

Looking back, we are optimistic that the company's energy storage business will resume rapid growth. In terms of household storage, we expect that European household storage may continue until the end of 3Q24. The industrial chain is expected to reach an inflection point, and the company's household storage business shipments are expected to resume growth. In terms of industrial and commercial storage, along with the expansion of domestic peak and valley electricity differences and low lithium carbonate prices, we expect the installed scale of industrial and commercial energy storage to grow rapidly; the company will continue to enrich medium- and high-power industrial and commercial energy storage products. Considering the significant increase in the amount of electricity charged by industrial and commercial storage products compared to household storage, we expect the gradual release of new industrial and commercial energy storage products, which is expected to drive the company's revenue growth further.

The comprehensive gross margin has declined, and the ability to control costs is good. The company's 2Q24 comprehensive gross margin was 30.9%, -2.8ppt/month-on-month -2.4ppt, mainly due to increased competition in the industry. The company's cost rate for the period (including R&D) was 14.8%, +5.8ppt/month-on-month -1.3ppt. The year-on-year increase was mainly due to the decline in the company's revenue scale. From a month-on-month perspective, the company continued to maintain good cost control capabilities. In addition, 2Q24 accrued asset impairment losses of 0.047 billion yuan, which dragged down net profit, mainly due to falling raw material prices.

Profit forecasting and valuation

Considering the slow withdrawal of European accounts, we lowered our 24/25e profit forecast by 41%/36% to 0.61/0.81 billion yuan. The company is currently trading at 15.1x/11.4x 24/25e P/E; we lowered our target price by 32% to 19 yuan, which corresponds to 18.2/13.7x 24/25e P/E and 20% upward space. We are optimistic about the company's competitiveness as a UPS leader, and we are optimistic about the continued rapid growth of the new energy business in the future to maintain a superior industry rating.

risks

The macroeconomic economy is declining, global demand for energy storage falls short of expectations, and global demand for photovoltaics falls short of expectations.