Hemai Co., Ltd. announced 2023 Q3 results: 23Q1-Q3 achieved revenue of 1,408 million yuan, up 50.4% year on year; net profit of 415 million yuan, up 14.7% year on year; of these, 23Q3 achieved revenue of 343 million yuan, down 18.8% year on year, down 29.2% month on month; net profit of 67 million yuan, down 58.2% year on year and 61.1% month on month. The 23Q3 gross margin was 49.1%, up 10.7 pct from the previous month.
Microreverse shipments are under pressure on a month-on-month basis, and Q4 is expected to gradually recover. 23Q3 had microinverted shipments of about 230,000 units, a year-on-year decrease of 35% and a year-on-month decrease of 31%. Due to the slow progress of inventory removal in Europe, wait-and-see sentiment in the superimposed market has not improved, and Q3 shipments were under pressure month-on-month. By region, Europe's share in 23Q3 increased to more than 60%, while the share of North America and Latin America (mainly Brazil) declined. The company expects Q4 orders to gradually resume. Considering the impact of overseas holidays in December, we expect Q4 shipments to rise slightly month-on-month. The company's micro-reverse shipments in '23 were about 1.38 million units, an increase of about 19% over the previous year.
Revenue from energy storage systems declined month-on-month, and inventory removal was slow. The company exports energy storage products overseas mainly for household use, and continuously improve R&D support for energy storage products and overseas channel layout. Products include single-phase 3-6kW and three-phase 5-12kW energy storage inverters, etc., and small-batch shipments began in 22Q4. 23Q3 The company's energy storage system achieved revenue of about 300 million yuan, a year-on-month decline, mainly due to the high storage inventory levels of households in Europe and the US and the slow progress of dewarehousing. We expect the company's energy storage system revenue to be about $230 million in '23.
Gross margin has improved dramatically, and R&D expenses have continued to expand. 23Q3 gross margin increased 10.7 pct to 49.1% month-on-month, and micro-inverse gross margin increased to more than 50%, mainly due to an increase in the revenue share of microinverse products with higher gross margins. The company continued to increase investment in R&D. In 23Q3, the company's cost rate was 36.1%, up 30.9pct from the previous month. Among them, the sales/management/R&D expenses ratio increased by 4.8 pct/3.6pct/5.9pct, respectively. The 23Q3 financial expense ratio increased month-on-month, mainly due to exchange losses of about 300 million yuan. The 2023Q3 inventory was 841 million yuan, up 3% from the end of the previous quarter. The company expects the high-power project to be confirmed in Q4.
Investment advice: Due to inventory pressure, core product shipments have slowed, and the company's profit is under pressure month-on-month, and Q4 is expected to gradually recover. We expect the company to achieve revenue of 21.0/32.8/5.20 billion yuan in 2023-2025 (previous value: 41.4/65.8/10.62 billion yuan) and net profit of 6.6/10.3/1.52 billion yuan (previous value: 12.2/18.4/29.1 billion yuan). Considering that the company is a leading domestic producer with a relatively high share of overseas revenue, the profit level is expected to remain at a high level. Continuing to give the company 40x PE in 2023, the target price was lowered 45.6% to 318.4 yuan from 585.0 yuan to 318.4 yuan, maintaining the “superior to the market” rating.
Risk warning: distributed photovoltaic installations fell short of expectations, overseas market development fell short of expectations, and industry competition intensified.