Company basic situation: The company was founded in 2012. Its main products include photovoltaic energy storage inverters, energy storage batteries, grid-connected inverters, etc., and is one of the earliest manufacturers to mass-produce energy storage inverter products in China. As of 2023, the European region is the company's largest sales market. The company's overseas revenue share in 2023 reached 99.3%, with the European region accounting for 93.04% of sales revenue in the first half of the year.
The company's performance has fluctuated greatly in recent years. In 2022, the company achieved a significant year-on-year increase in revenue (yoy +454%), then the company experienced a year-on-year decline in revenue for the first three quarters of 2023-2024 (yoy -3%/-40%).
Highlight 1: New products: Expanding from household use to industrial and commercial storage, micro reverse storage, and large storage, opening up new application scenarios horizontally.
The main application scenarios of the company's current products are household and small and medium-sized businesses. In recent years, the company has stepped up research and development of new products, including energy storage systems (power 50-100kW, battery capacity 100-215kWh) and micro inverters (300-2200KW) suitable for industry and commerce.
The company announced in September '24 that it will invest in the construction of large-scale energy storage systems and smart energy system R&D and production projects in Tonglu Economic Development Zone. It is expected to be completed within 24 months and put into operation 6 months after completion.
Highlight 2: New Markets: The breakthrough lies in incremental markets such as Europe's Big Reserves/Commercial Savings, Asia, Africa, and Latin America.
1) Europe: Demand for household storage is slowing down, and demand for large storage/commercial storage is expected to increase. According to the “European Energy Storage Market Outlook 2024-2028” issued by the European Photovoltaic Industry Association (SolarPower Europe), European household storage capacity is expected to drop 26% in 2024; in response, European demand for large-scale energy storage such as industrial and commercial energy storage and grid-side energy storage is expected to grow rapidly. It is expected that Europe's large storage capacity will exceed 10 GWh for the first time in 2024, and European countries such as Italy, Germany, and the United Kingdom are all expected to achieve a continued high increase in demand for large storage/commercial storage in 2024-2028.
2) Asia, Africa, and Latin America: Demand for optical storage increased rapidly. Starting 24H1, the company actively expanded emerging markets and launched new products in response to demand. In the first half of 2024, the company expanded into emerging markets and achieved product sales in regional markets such as Pakistan, Ukraine, and South Africa. At the demand level, we expect that financial support, falling photovoltaic costs will drive economy, and weak power grids will cause electricity security problems, and demand for optical storage in Asia, Africa, and Latin America will continue to rise. At the product level, the company launched the X1-HYBRID LV, a new low-voltage household storage PCS product. Functionally, the new product and future versions will be more suitable for Asia, Africa, and Latin America, which is expected to help the company accelerate the development of the Asian, African, and Latin American markets.
Profit forecast
We expect the company's 24-26 revenue to reach 3.659/4.758/5.845 billion yuan, yoy -18.2%/+30.0%/+22.8%, net profit to mother 0.259/0.491/0.77 billion yuan, yoy -75.67%/+89.53%/+56.95%, respectively.
We selected Deye Co., Ltd., Goodway, and Jinlang Technology, which are similar to the company's energy storage battery and photovoltaic energy storage inverter business, as comparable companies. Considering the possibility of the company's second growth curve in new products and new markets, we chose the PEG valuation method. Based on WIND's unanimous expectations, we calculated that the comparable company expected PEG in 2024 was 0.67, giving the company PEG = 0.67 in 2024, the corresponding target PE was 48.3X in 2024, and the corresponding target price was 78.29 yuan. The first coverage gave it a “buy” rating.
Risk warning: Risk of sustainability of revenue growth and risk of performance fluctuations; increased competition; risk of market development falling short of expectations; risk of outsourced battery cell purchases; risk of changes in international trade and industry policies; global expansion falling short of expectations; estimates in this article are subjective and are for reference only.
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