The company's 24Q3 revenue was 0.553 billion yuan, +12.31%/+16.71%, net profit to mother 0.017 billion yuan, +145.66%/+10.19%, after deducting non-0.007 billion yuan, or +86.84%/-394.88% YoY. This is lower than our previous expectations of 0.027 billion yuan, mainly due to high overseas storage pressure. The 24Q3 company achieved gross margin/ net profit margin of 33.02%/3.06%, -5.49/-0.29pct month-on-month, mainly due to increased competition in the industry. The cost ratio for the 24-year Q3 period was 25.26%, -6.49pct month-on-month, mainly due to scale effects. Among them, sales/management/R&D/finance cost ratios were -3.83/-0.69/-3.51/+1.54pct month-on-month, respectively. As demand from overseas households picks up, the company's capacity utilization rate is expected to pick up quarter by quarter, achieve a sharp rise in quantitative profit, and expand the new market for industrial and commercial storage. We maintain the “increase in holdings” rating.

The decline in overseas household storage demand+product price reduction+high-price inventory dragged down performance and sought to strengthen the layout of emerging markets

Affected by falling electricity prices and declining subsidy policies, etc., demand in the overseas household storage market slowed in stages compared to the same period last year, and overseas channel inventory had not yet been eliminated, leading to a year-on-year decline in the company's household storage battery sales in the first three quarters. Due to the decline in raw material prices and increased competition, the unit price of the company's products also declined year-on-year. High inventory+weakening scale effect+price reduction led to a decline in the gross margin of the company's battery packs. Currently, the company's inventory pressure is still high. As the company's Q3 sales begin to gradually pick up, we expect the company to restore inventory to a reasonable level by the end of this year. In addition, the company is also currently actively exploring emerging markets. The penetration rate of emerging markets is low and the growth rate is fast, which is expected to contribute to the company's performance growth.

Actively expand commercial and commercial storage products, which is expected to contribute to increased performance

The company's household storage products accounted for more than 80% of shipments in the first half of this year, while industrial and commercial storage products accounted for about 10%. As overseas household storage shipments and unit prices declined, the company increased its investment in industrial and commercial storage products and launched new industrial and commercial energy storage products, 261 kWh liquid-cooled energy storage integrated cabinet, 417 kWh liquid-cooled DC cabinet, 113 kWh air-cooled energy storage integrated cabinet, and 5 MWh liquid-cooled container energy storage system, covering all industrial and commercial energy storage scenarios. The company's industrial and commercial storage products are highly profitable in overseas markets. We expect the company's share of industrial and commercial storage shipments to continue to increase in 2025, effectively driving the company's revenue and profit growth.

Lower household storage shipments and profitability assumptions, and maintain the “increase in holdings” rating

Considering the high pressure on European household storage and increased profitability pressure, we lowered the company's 24-26 energy storage battery system shipment forecast to 1.55/3.20/4.20 GWh (previous value 2.40/3.50/4.55 GWh) and lowered the company's net profit forecast to 0.139/0.486/0.672 billion yuan (previous value 0.455/0.602/0.758 billion yuan). Referring to the 25-year wind consensus forecast, the average PE is 22 times. Considering that the company has significant channel advantages, performance is expected to return to growth after completion. The company is given 28 times the target PE for 25 years, corresponding to the target price of 55.44 yuan (previous value 77.70 yuan), maintaining the “increase” rating.

Risk warning: Poor capacity deployment, fluctuating raw material prices, exchange rate fluctuations, export trade policy risks.