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The company publishes three quarterly reports in 2023. In the first three quarters of 2023 (January-September), the company achieved operating income of 5.739 billion yuan, down 11.7% from the same period last year, and its net profit was 275 million yuan, down 38.0% from the same period last year. In the third quarter, the company achieved a single-quarter revenue of 1.365 billion yuan, a decrease of 44.0% compared with the same period last year, and a net profit of 23 million yuan, a decrease of 88.3% over the same period last year.

Peace viewpoint:

The company's third-quarter results are under pressure, but the cash recovery ability is excellent. 1) revenue side: the company achieved revenue of 5.739 billion yuan in the first three quarters of 2023, down 11.7% from the same period last year, and 1.365 billion yuan in the third quarter, down 44.0% from the same period last year. The company's revenue in the third quarter was lower than expected, mainly due to the delay of overseas storage and the backlog of household storage inventory, which led to the pressure on the demand for energy storage batteries. 2) Gross profit margin: the gross profit margin of the company in the first three quarters was 18.58%, down 0.3 pct from the same period last year; the gross profit margin in the single quarter was 19.96%, 17.36% and 17.73%, respectively, and the gross profit margin in the third quarter was slightly better than the same period last year. 3) expense side: in the first three quarters, the company's four fees for sales, management, R & D and finance totaled 11.26%, an increase of 1.68 percentage points over the same period last year, in which the rate of management and R & D expenses increased, mainly due to the decrease in revenue and equity incentive fees; the increase in the rate of financial expenses is mainly caused by the decrease in exchange earnings. 4) net interest rate: in the first three quarters of 2023, the company's net sales profit rate was 4.97%, a decrease in 2.0pct compared with the same period last year (6.97%), mainly due to a decrease in gross profit margin, an increase in expense rate and inventory impairment. 5) cash flow: the net cash flow generated by the company's operating activities was 411 million yuan, an increase of 117.02% over the same period last year, mainly due to the good payback situation of the company and the improvement of working capital turnover efficiency.

Overseas demand is under pressure, and the annual growth rate of China's energy storage battery shipments may not be as fast as expected. According to GGII statistics, 2023Q3 China energy storage lithium battery shipments 40GWh, down 33% month-on-month than the previous year, the cumulative shipments of 2023Q1murQ3 energy storage lithium battery 127GWh. The third quarter is the peak season of traditional lithium battery shipments, but Q3 energy storage lithium battery shipments decreased month-on-month. Combined with GGII analysis, we think the reasons are as follows:

1. In the aspect of large storage, due to the tedious grid connection process, limited supply chain and other factors, the overseas large storage project represented by the United States has been seriously delayed. 2. In terms of household savings, electricity prices in Europe are lower than in 2022, interest rates in the United States are high, and the growth rate of household savings demand in Europe and the United States is significantly slower than that in 2022. At the same time, there is a large backlog of early inventory, resulting in lower-than-expected battery demand. The fluctuation of lithium carbonate price affects the downstream purchasing intention. On October 24th, GGII lowered China's annual energy storage lithium battery shipment forecast to 180GWh, which is about 1% lower than the agency's expected target 230GWh at the beginning of the year. The slowdown in the growth of energy storage battery demand has put pressure on the company's performance, and demand growth is expected to improve in 2024 as short-term factors such as overseas storage and grid queuing and household savings destocking ease.

Production capacity has fallen steadily and the potential for growth is sufficient. According to the company's semi-annual report of 2023, as of June 30, the company has an annual production capacity of 4.044 billion Ah, which is about 12.9GWh according to the average nominal voltage of 3.2V. On August 8th, Quzhou Penghui's first batch of battery products were successfully offline, marking the first phase of Quzhou Penghui annual production 11GWh smart energy storage battery project officially entered the stage of mass production and delivery. On September 26th, the company officially started construction of the zero-carbon manufacturing base of energy storage battery in Qingdao. The total capacity of energy storage battery is planned to be 36GWh. The first phase capacity of this project is 12GWh, which is expected to be completed and put into production by the end of December 2024. The global energy storage market has a broad space, the company's strategy focuses on energy storage, attaches importance to the growth potential of the energy storage market, steadily promotes production expansion, and has sufficient stamina for growth.

The buyback program demonstrates long-term confidence. On October 25, the company issued an announcement on the plan to buy back the shares of the company. The company intends to use its own funds of 5000-60 million yuan to buy back some of the company's shares for the implementation of subsequent employee stock ownership plans or equity incentives, the repurchase price shall not exceed 50 yuan per share (inclusive). The implementation period of the repurchase shares shall not exceed 12 months, and the number of shares that can be repurchased is expected to be 1 million-1.2 million shares. The share buyback program demonstrates the company's management's confidence in the prospect of sustainable development in the future, as well as the affirmation of the company's long-term intrinsic value.

Investment advice: the company focuses on the energy storage battery track with strong strength. The company's large reserves, industrial and commercial storage business expansion is smooth, home storage market position is leading, long-term growth potential is expected. Taking into account the delay in the integration of overseas large deposits into the grid during the year, the slowdown in the growth rate of household savings demand and the elimination of inventory, the company's full-year results were affected to a certain extent, we lowered the company's 2023x2024max 2025 net profit forecast to 4.3pm 9.3 / 1.42 billion yuan (the previous value is 7.6pm 15.9 / 2.4 billion yuan), corresponding to the closing price of PE on October 26th is 37.5pm 17.3pm 11.3 times. With the high growth of the global energy storage battery market, the solid layout of the company's energy storage lithium battery business, timely card positions, industrial and commercial energy storage and other emerging tracks, the growth potential is sufficient, we are optimistic about the company's long-term value and maintain the "recommended" rating.

Risk tips: 1. The risk of less than expected growth in global demand for energy storage. At this stage, domestic large storage projects are driven by strong policies as a whole, and if the growth rate of new energy installation, the proportion of allocated storage / duration growth is lower than expected, or if the independent energy storage business model falls short of expectations, the growth of domestic energy storage may be affected; in overseas markets, if energy prices fall sharply in Europe, or the relevant policies of the battery industry chain in Europe and the United States are further tightened, it may lead to lower-than-expected growth in overseas household and large reserves. two。 The risk of increased cell price competition. Under the factors such as the decline in the price of lithium carbonate and the popularity of the centralized procurement mode of bidding enterprises, the shipping price of domestic energy storage batteries continues to decline, and the gross profit margin of the company's domestic business may be affected. 3. The risk of bad debts of accounts receivable, with the expansion of the sales scale of the company, the scale of accounts receivable increases, and there is a potential risk of bad debts.