Incidents:

On October 29, 2024, Shangneng Electric announced its report for the third quarter of 2024: In the first three quarters of 2024, the company achieved revenue of 3.1 billion yuan, -7%; net profit to mother of 0.3 billion yuan, +45% year over year; net profit without return to mother 0.3 billion yuan, +51% year on year; gross sales margin of 25.3%, +5.8pct year on year; net sales margin 9.8%, year-on-year +3.5pct.

Among them, 2024Q3 had revenue of 1.14 billion yuan, +1% YoY, -6% month-on-month; net profit of 0.14 billion yuan, +93% YoY, +29% month-on-month; net profit of 0.14 billion yuan, +105% YoY, +30% month-on-month; gross sales margin 29.3%, +5.6 pct YoY, +6.6pct month-on-month; net sales margin of 12.3%, +5.9pct YoY and +3.3pct month-on-month.

Investment highlights:

In the third quarter of 2024, the company's revenue remained flat, profit performance was impressive, and profitability increased dramatically. In the third quarter of 2024, the company's revenue was basically flat year on year (+1%), and profit side performance was impressive. Net profit after deducting non-return to mother increased more than doubled year on year (+105%), and increased (+30%) from month to month. Profitability increased dramatically, with gross sales margin of 29.3%, +5.6pct year on year, +6.6pct month-on-month; net sales margin 12.3%, +5.9pct year-on-year, +3.3pct month-on-month.

Cash flow from construction projects and operations increased year-on-year, and the operating climate is improving. The company achieved a significant year-on-year increase in projects under construction in the first three quarters. By the end of 2024Q3, the company's projects under construction were 0.17 billion yuan, an increase of 841% compared with the beginning of the year, and 0.001 billion yuan at the end of the 2023Q3 period. Looking at a single quarter, the company's 2024Q3 operating cash flow was 0.12 billion yuan, +119% year over year and +148% month over month.

The global layout hit the acceleration button, and the company's first US energy storage project was successfully delivered in September 2024. The company's global layout is gradually deepening, and it has now completed the layout of major global photovoltaic markets including the United States, Europe, India, the Middle East, Africa, South America, Southeast Asia, and Central Asia.

2024H1's overseas business revenue increased 115.46% over the same period last year. Overseas market performance gradually increased, and the company's business in the Indian and Middle Eastern markets increased significantly. According to official WeChat published on July 1, 2024, the company has successfully shipped a 1.016 GW high-efficiency centralized inverter booster to the Al Kahfah solar power plant project in Saudi Arabia. In September 2024, the North American Service Center in Texas, USA officially opened, marking a solid step in deepening the company's localized operating system. The first 140.8 MW energy storage power plant supplied by the company to the US market is located in southern Texas, USA. The project includes a total of 44 SSE 3.2MW string energy storage and boosting all-in-one units. The first batch of 22 all-in-one string energy storage and boosting units was successfully delivered in September 2024.

Profit forecast and investment rating: The company is the world's leading supplier of optical storage solutions. The company is expected to achieve operating income of 6.9/9.23/11.15 billion yuan in 2024-2026, with year-on-year growth rates of +40%, +34%, and +21% respectively; net profit to mother is 0.55/0.83/1.02 billion yuan, with year-on-year growth rates of +92%, +52%, and +22% respectively; EPS is 1.5/2.3/2.8 yuan. The PE corresponding to the current stock price is 31X, 20X, and +21%, respectively 17X The company's performance grew steadily and maintained its “gain” rating.

Risk warning: changes in the world energy landscape, core competitiveness risks, business risks, industry risks, macro-environmental risks, overseas market expansion risks, raw material fluctuation risks.