24Q3 revenue was 1.143 billion yuan, +0.83%/-5.88% YoY, 0.141 billion yuan, +92.59%/+28.83% YoY, less 0.143 billion yuan, +104.70%/+29.54% YoY, which basically met our previous expectations of 0.14 billion yuan. 24Q3 gross margin/net margin reached 29.26%/12.32%, +6.62/+3.32pct month-on-month. Profitability increased significantly, with an increase in the share of major groups and an increase in overseas share. The cost rate during the 24Q3 period reached 16.82%, +5.37pct month-on-month, mainly due to a decrease in revenue base. Among them, sales/management/R&D/finance were +2.09/+0.77/+0.90/+1.61 pct, respectively. The company's domestic and foreign business is two-wheel drive, and photovoltaic energy storage are all expected to grow rapidly, and we maintain a “buy” rating.

PV inverters: Leading the domestic bid scale. Overseas channels continue to build up the domestic market. According to Solbi Consulting, the domestic PV inverter bid scale reached 7.2 GW in the 3rd quarter of '24. Among them, Shangneng Electric won the bid for 1.257 GW, ranking second only after Huawei. The company has obvious advantages in the field of centralized inverters. In overseas markets, in September '24, the company signed a nearly 600MW photovoltaic inverter framework agreement with two distributors in Brazil to enter the South American market through local distributor channels. According to BNEF, the company was selected for the third quarter of 2024 in the global list of first-class photovoltaic inverter manufacturers, and has been among them for a year in a row. In terms of product certification, in August '24, the company's entire distributed scenario products were qualified for the German market. With the company's two-round layout at home and abroad, we believe the company is expected to benefit from increased demand for inverters worldwide.

Energy storage: The domestic high-power leader position is stable, and the US has performed well in overseas expansion. The company maintained its position as the leading domestic high-power PCS company. According to the China Telecommunication Union, the company steadily ranked first in the power scale ranking of domestic PCS manufacturers in the first half of '24. According to CNESA, domestic energy storage added 42.1 GWh of installed capacity in January-September '24, +50.4% over the same period. The company is expected to benefit from the boom in domestic energy storage.

In addition, the company is actively expanding overseas markets and gradually opening up the US market. In September '24, the company completed the first energy storage project in the US and successfully supplied 22 all-in-one string energy storage and boosting machines. In the same month, the company's North American service center opened in Texas, USA. In terms of products, the company released a 400kW string energy storage converter at the 2024RE+ US exhibition, which was deeply optimized for the US market, leading the all-in-one string converter into the 6.25MW era.

Maintain a “buy” rating

Considering the slowdown in the pace of energy storage projects being connected to the grid, we revised the energy storage business shipment assumption and estimated net profit of 0.503/0.704/0.908 billion yuan (previous value 0.561/0.789/1.029 billion yuan) for 24-26. Referring to the consistent expectations of the company's 25-year Wind, the average PE is 16 times. Considering the company's significant cost advantage, the energy storage business is expected to expand rapidly and the product spectrum will expand at an accelerated pace. We gave the company a 25-year target PE 28 times, a target price of 54.88 yuan (previous value 45.53 yuan), maintaining a “buy” rating.

Risk warning: The development of the industry fell short of expectations, market competition intensified, and the increase in upstream raw materials exceeded expectations.