Industry sentiment declined, and revenue declined year-on-year

Kuaike electronically released its three-quarter report for 2024, and the company achieved revenue of 0.744 billion yuan in the first three quarters of 2024, YOY -24.9%. Achieved net profit of 0.089 billion yuan, yoy -39.3%, realized net profit of non-return to mother of 0.079 billion yuan, yoy -41.7%. Among them, 2024Q3 achieved revenue of 0.197 billion yuan, QoQ -31.7%, and YOY -42.1%. Net profit to mother 0.019 billion yuan, QOQ -36.4%, YOY -67.6%. Net profit after deducting non-return to mother was 0.017 billion yuan, QOQ -35.1%, YOY -68.2%. The gross margin and net margin for single Q3 were 17.5%/9.7%, respectively, -2.3/-0.7pct month-on-month, and the sales/management/ R&D/financial expense ratios were 0.5%/3.5%/4.8%/-0.7%, respectively, -0.3/+1.4/+0.6/+0.0pct month-on-month, respectively. Considering the decline in industry sentiment, the company's sales volume is declining, and product sales prices are under pressure, we lowered the company's profit forecast for 2024-2026. The company's net profit for 2024-2026 is 0.112/0.146/0.181 billion yuan (originally 0.15/0.179/0.239 billion yuan), EPS is 1.35/1.75/2.17 yuan, corresponding to the current stock price PE is 29.8, 22.9, 18.4 times. Considering that the company continues to expand overseas customers and accelerate product iteration, it guarantees a stable level of gross margin and maintains a “buy” rating through improving the regional revenue structure and increasing the revenue share of new products.

Junction boxes were gradually pressured by the decline in industry sentiment. Expanding overseas module customers opened up incremental space. In the first three quarters of 2024, the company's junction box business was affected by increased competition for downstream photovoltaic modules, and the module sector was affected by price pressure transmitted to upstream junction box accessories due to cost control requirements. Overall revenue and gross margin levels declined compared to the same period last year. However, the company is actively expanding overseas module customers and has established long-term friendly cooperative relationships with overseas module companies such as ADANI and HANSOL, so that the company's products are widely used in the construction of photovoltaic power plants in South Korea, India, Vietnam, Germany, Spain, Egypt, and the United States. At the same time, it is planned to establish the American Kuaike Photovoltaic Electronics Co., Ltd. to support the production of American module companies and implement production capacity overseas. In the future, as the company continues to promote overseas products and production capacity, the company's overseas revenue is expected to continue to increase.

Continue to increase R&D investment to promote product updates and iterations

Despite the decline in industry prosperity, the company keeps an eye on the industry development path of its main business products and actively develops product performance and new products. In 2024, the company's products such as marine photovoltaic connectors, cables for energy storage systems, UL 2000V series product connectors, and junction boxes passed TV Rhein certification one after another.

Risk warning: The rise in raw material prices has led to a decline in profitability; the sales price of junction box products has declined further.