Incident: The company achieved operating income of 4.95 billion yuan in 2023, an increase of 52.9% over the previous year; achieved net profit of 5 yuan, an increase of 87.7% over the previous year; net profit after deducting non-return to mother was 490 million yuan, an increase of 90.8% over the previous year. In the first quarter of 2024, the company achieved revenue of 1.03 billion yuan, an increase of 46.4% year on year; realized net profit of 90 million yuan, an increase of 104.3% year on year; net profit after deducting non-return to mother was 90 million yuan, an increase of 104.6% year on year.

Profitability continues to improve, and cost rate control is better. Profit side: In 2023, the company's gross sales margin/net margin was 22.7%/10.1%, up 1.5pp/1.9pp year on year; 24Q1 gross margin/net margin was 23.1%/8.7%, respectively, up 3pp/2.4pp. Expense side: The company's 2023 sales/management (excluding R&D)/financial expenses rates were 3.7%/2.6%/-0.1%, respectively, +0.1pp/+0.03pp/ -0.7pp, respectively, compared to +0.1pp/+0.03pp/ -0.7pp, respectively, and the cost rate control was good.

The new energy business is experiencing high growth, and the cost advantage is remarkable. In 2023, the company's photovoltaic industry line achieved revenue of 2.07 billion yuan, an increase of 83% over the previous year; the wind power industry line achieved revenue of 1.38 billion yuan, an increase of 22% over the previous year; and the energy storage industry line achieved revenue of 670 million yuan, an increase of 237% over the previous year. Benefiting from the company's strengthened control over the supply chain and the cost advantages brought by its own technological progress, the company's gross margin in the new energy sector was 22.7% during the reporting period, an increase of 1.5pp over the previous year.

Build the core competitiveness of offshore new energy sources and promote the pace of localization. The company continues to promote research and development of offshore photovoltaic products and launch booster system solutions suitable for offshore photovoltaic power generation application scenarios based on the technical platform and sea breeze field. In October 2023, the company successfully won the bid for Guohua's HG14 offshore photovoltaic 1000MW project. It is currently the world's first GW-class high-capacity offshore photovoltaic project to enter the implementation stage, and is expected to contribute to new performance growth.

Overseas transformer demand is booming, and the company's overseas progress is expected to accelerate. Due to the increase in demand for new energy installations, the upgrading of old equipment in European and American power grids, and the imbalance between overseas transformer supply and demand, the company actively participated in the international market in 2023. Through cooperation with well-known domestic leading new energy companies, the company rapidly expanded its popularity in the international market.

The company has established a “indirect overseas going+global layout” two-wheel drive strategic model and has obtained a series of domestic and international certifications, laying a solid foundation for the company's global layout.

Profit forecasting and investment advice. The company's revenue for 2024-2026 is expected to be 6.46 billion yuan, 8.21 billion yuan, and 9.79 billion yuan, respectively, and the year-on-year growth rate of net profit to mother for the next three years is 29.1%/32.7%/19.3%, respectively. Relying on the Mingyang Group technology platform, the company has significant advantages. Benefiting from the recovery of installed air from the sea and high demand for transformers from overseas, the company's performance is expected to continue to improve, and for the first time, coverage was given a “holding” rating.

Risk warning: the risk of overseas business expansion falling short of expectations; the risk of Haifeng's installation falling short of expectations; the risk of exchange rate fluctuations affecting the company's overseas business revenue; the risk that new product development falls short of expectations; and the risk of intense competition affecting the company's profit level.