Performance situation: Q3 profit increased year-on-year, and gross margin increased significantly. The company achieved operating income of 3.07 billion yuan in the first three quarters of 2024, down 7.3% year on year. Mainly due to product restructuring, the share of high-cost energy storage system shipments decreased compared to the same period last year; realized net profit of 0.302 billion yuan, an increase of 44.8% year on year. Looking at 24Q3, the company achieved net profit of 0.141 billion yuan to mother. The year-on-year increase was 92.6%, and the month-on-month increase was 28.8%; net profit after deducting non-return to mother was 0.143 billion yuan, up 104.7% year over year, and 29.5% month-on-month. In terms of profitability, the company's 24Q3 gross and net sales margins were 29.26%/12.32%, respectively, up 5.62 pct/5.85 pct year on year, mainly benefiting from high-profit order shipments in the US and the increase in the share of new products to promote cost reduction and efficiency.

Photovoltaic inverters: Domestic and foreign demand is growing steadily, product structure optimization boosts profits. On the demand side, against the backdrop of a rapid decline in photovoltaic power costs, domestic PV installed capacity is growing steadily, and PV ground power plants in India and the Middle East have entered the release stage. On the profit side, the company is a leading domestic centralized/large string inverter enterprise. While directly benefiting from increased demand, it is actively promoting the iteration of probable products and the introduction of high-margin stringed products to promote cost reduction and efficiency.

Energy storage PCS: High-profit order delivery in the US supports profit levels. Focus on Q4 Shipment Upward Resilience's North American Service Center opened in Texas in September. The company's localized operation and service layout in North America accelerated. At the same time, the first US energy storage project was also shipped in the 3rd quarter. The company currently has plenty of high-profit PCS orders in the US, or centralized delivery within the year, supporting the fourth quarter results.

Looking at next year's dimension, India and Middle East reserves may open batch tenders. The company's costs and product advantages are expected to expand in the medium to low fault tolerance market, and the share is supported. The company's high-ROE market layout in Europe and Australia is also expected to enter a harvest period, supporting subsequent high profit growth.

Investment advice

We expect the company's net profit to be 0.568/0.793/1.007 billion yuan in 2024-2026, corresponding to 28/20/16 times PE, maintaining a “buy” rating.

Risk warning

Global demand for optical storage falls short of expectations; company order delivery falls short of expectations; changes in overseas trade policies.