3Q24 results are in line with expectations

The company announced 1-3Q24 results: revenue of 2.41 billion yuan, down 39.9% year on year; net profit to mother of 0.16 billion yuan, down 84.2% year on year, of which 3Q24 revenue was 0.823 billion yuan, up 35.4% year on year, down 8.5% month on month; net profit to mother was 0.057 billion yuan, up 34.0% year on year, down 16.8% month on month, and performance was in line with expectations.

Development trends

Demand weakened in regions such as Pakistan and India due to the rainy season, and the company's inverter shipments declined month-on-month.

June-September is the rainy season in Pakistan, India and other regions. It affects the installation of household optical storage systems. Terminal channel operators and installers slow down purchases due to inventory digestion, affecting the company's external sales. In 3Q24, the amount of inverters exported by China to Pakistan and India declined by 31% and 2%, respectively, causing the company's shipments to Southeast Asia to decline. We expect the company to ship 0.074 and 0.018 million 3Q24 grid-connected inverters and energy storage PCS respectively, a decrease of 39% and 52%, respectively. Looking ahead to Q4, the end of the rainy season in Pakistan, India, etc. may drive the company's shipments to pick up, while markets such as Japan and the US are also expected to continue to expand.

The product matrix is constantly being improved. The company launched a variety of industrial and commercial storage products, with a power coverage of 50-100kW. It also launched household products such as low-voltage single-phase energy storage inverters, low-voltage energy storage batteries, and micro inverters, continuously enriching the product line and product application scenarios.

The gross margin decreased slightly, and the cost ratio was well controlled. 3Q24 The company's gross profit margin was 35.3%, a slight decrease of 1.5ppt, and the company's sales/management/R&D/finance expense ratios were 12.3%/5.2%/17.7%/-7.0%, respectively, -1.3pp/+0.8pp/+3.0ppt/-4.6ppt, respectively. The overall cost ratio was well controlled. 3Q24 The company's net profit margin was 7.0%, down 0.1 ppt year on year and 0.7 ppt month on month.

Profit forecasting and valuation

Due to the decline in industry demand growth, we cut our 2024 and 2025 net profit by 49% and 29% to 256 million yuan and 493 million yuan. The current stock price corresponds to 37.5 times the 2024 price-earnings ratio and 19.5 times the 2025 price-earnings ratio. Maintaining an outperforming industry rating, due to the upward trend in the industry's valuation center, we maintain a target price of 75 yuan, which corresponds to 24.3 times the price-earnings ratio of 2025, and has 24.9% upside compared to the current stock price.

risks

Demand for household storage falls short of expectations, industry competition intensifies, new market development falls short of expectations, and exchange rate risks.