Description of the event

Sunshine Power released its 2024 semi-annual report. 2024H1 achieved revenue of 31.02 billion yuan, up 8.38% year on year; Among them, 2024Q2 achieved revenue of 18.406 billion yuan, up 14.74% year on year, and 45.92% month on month; Among them, achieved revenue of 18.406 billion yuan, up 14.74% year on year, up 45.92% month on month; net profit of 2.863 billion yuan year on year, up 36.56% month on month.

Incident comments

In the inverter business, the company achieved revenue of 13.1 billion yuan in 2024H1, an increase of 13% over the previous year. 2024H1 gross margin reached 37.6%, up 1.7 pct year over year. Considering the reduction in cost rates due to factors such as changes in accounting standards, the Q2 net interest rate for inverters is expected to increase month-on-month. Inverter Q2's profitability was better than expected, reflecting continuous optimization of the company's market and capacity structure, increased scale effects, and continued receipt of brand premiums.

In the energy storage business, the gross margin of 2024H1 reached 40.0%, up 12.6 pcts year on year. It is expected that the high base of Q1 will decline. On the one hand, the revenue from the price drop of lithium carbonate may decrease, and on the other hand, warranty insurance is included in operating costs under the new accounting standards, but in reality, the company's profitability in energy storage Q2 remains good.

In the power plant business, the company achieved revenue of 8.95 billion yuan in power plant development in the first half of the year, an increase of 18% over the previous year. Of these, Q2 is expected to increase significantly compared to Q1. The gross profit margin for the first half of the year was 16.9%, up 5.4 pct from the previous year, which was better than expected. The main reason was the increase in high-quality scenic ground power plant projects, and the decline in superimposed component prices led to a decrease in costs.

According to other financial data, the company experienced a credit impairment of 0.3 billion in Q2, mainly due to an increase in the company's accounts receivable at the end of the period, which led to an increase in the accrual scale. The expense ratio for the Q2 period is 10.0%. Even considering the impact of the change in accounting standards on the sales expense ratio, it is expected that the expense ratio for the period after adding back will still decrease compared to Q1, reflecting the good management and control of the company's operations. Furthermore, the company's contract debt reached 9.04 billion at the end of Q2, up 60% year on year and 11% month on month, reflecting the company's abundant orders.

Looking ahead, the company showed significant alpha in the energy storage and inverter business, and its profit contribution grew steadily. There is no shortage of possibilities that the quantitative profit performance of the energy storage business will continue to exceed expectations. In terms of dividends in emerging markets, due to the fact that terrestrial power plants have a certain delivery cycle, it is expected that the second half of the year will enter a centralized implementation phase, and large storage markets such as the Middle East, Europe, Latin America, and Australia are expected to achieve explosive growth.

As a leading energy storage enterprise, the company has shown stronger rapid delivery, localized services, and customized design capabilities in the context of the recent trend of grid energy storage, and its comprehensive competitiveness is more prominent. Recently, the company has signed a number of large orders such as 7.8 GWh in Saudi Arabia, 880 MWh in Latin America, and 760 MWh in Saudi Arabia. More large orders are expected to be settled in the second half of the year against the backdrop of improving trends in emerging markets such as Asia, Africa and Latin America, supporting the quarterly upward trend in shipments throughout the year; Lixiang continues to enjoy the benefits brought about by market structure optimization, increased scale effects, and falling battery prices, and the gross margin level of energy storage is good throughout the year.

We have revised the company's performance expectations. We expect the company to achieve net profit of 11.3 billion and 13.3 billion in 2024-2025, corresponding to PE of 14 or 12 times. The margin of safety is obvious, and the “buy” rating is maintained.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.