Description of the event

Hemai Co., Ltd. released its 2024 semi-annual report. 2024H1 achieved revenue of 0.908 billion yuan, a year-on-year decrease of 14.78%; of these, 2024Q2 achieved revenue of 0.576 billion yuan, a year-on-year decrease of 46.16%; among them, achieved revenue of 0.576 billion yuan, a year-on-year increase of 18.9%, an increase of 73.91% month-on-month; and a net profit of 0.12 billion yuan, a year-on-year decrease of 78.78%.

Incident comments

In the micro reverse and DTU business, the company achieved revenue of 0.75 billion yuan in the first half of the year, a year-on-year decrease of 15% (23H1 high base), micro inverse sales of 0.614 million units, and DTU sales of 0.144 million units. The company's demand is expected to improve in Q2, mainly due to the recovery in the European and Latin American markets, and the company's further expansion of the market by releasing new products and participating in exhibitions. The company's slight reversal gross margin reached 53.2% in the first half of the year, showing impressive performance.

In the energy storage business, the company achieved revenue of 0.14 billion in the first half of the year, an increase of 60% over the previous year. It is expected to increase significantly in Q2 from month to month, with a gross profit margin of 17.0% in the first half of the year, which remains stable. Currently, the company's energy storage revenue mainly comes from large storage. The first half of the year is a low delivery season, and it is expected that delivery will be completed at an accelerated pace in the second half of the year.

According to financial data, the company's expense ratio for the Q2 period was 23.4%, down 9.2 pcts from month to month. The main reason was the increase in the company's scale effect and revenue growth diluted the expense ratio. Q2 R&D expenses were 0.07 billion, an increase of 0.02 billion yuan, which is the second-highest level in history. At the end of Q2, the company's inventory was 0.97 billion, an increase of 16%. This is mainly due to the expansion of the company's business scale and an appropriate increase in inventory preparation efforts. Q2 Other income of 0.03 billion was mainly government subsidies; credit impairment losses of 0.01 billion were mainly due to an increase in scale and an increase in accounts receivable.

Looking ahead, Hemai's long-term core logic comes from the continued high growth rate and stable and good profitability of the slightly inverted market. In the short term, as European inventory removal drives short-term demand recovery, and the expansion of scenarios such as balcony micro storage and micro inverse markets, the company's micro reverse business also continues to perform well. We expect the company's Q3 micro reverse sales to grow month-on-month. At the same time, the energy storage business is also expected to build a second growth curve to further increase profits.

We expect the company to achieve net profit of 0.59 billion and 0.81 billion in 2024-2025, corresponding to PE 25 and 18 times, maintaining a “buy” rating.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.