Key points of investment

Incident: The company's 24Q1-3 revenue was 0.82 billion yuan, -6.8% YoY, net profit 0.16 billion yuan, YoY -8.9%, gross profit margin 46.2%, YoY -1.6pct, YoY net interest rate 19.4%, YoY -0.4pct; of these, 24Q3 revenue was 0.29 billion yuan, -15.5%/-1.2% YoY, net profit to mother 0.06 billion yuan, -21.2%/+4.5% YoY 2.3/-2.4pct, net interest rate to mother 20.3%, -1.5/+1.1pct year-on-month. Downstream demand continues to weaken, and performance falls short of market expectations.

The domestic economy is recovering weakly, and weak demand is putting pressure on performance. From July to September '24, China's manufacturing PMI index was 49.4%/49.1%/49.8% respectively, all below the boom and bust line, and overall downstream demand was weak.

The company's downstream is mainly aimed at general industrial, commercial, park, municipal customers, etc., and is greatly affected by the macroeconomic environment, which puts a slight pressure on performance. The company continues to strengthen its sales channel layout and product iterative research and development. The EMS series product line is gradually maturing and improving, and hardware products such as charging piles and energy storage become competitive. Looking forward to 25-26 years. With economic recovery and the advancement and improvement of the marketability of electricity reform, the company's business is expected to increase market penetration in the form of energy system solutions, and revenue is expected to achieve steady growth.

Actively go overseas to deal with the impact of domestic demand, and strengthen channel construction to lay a good foundation for development. The company has successfully expanded its customer base in more than 120 countries around the world, and has made remarkable progress in the Southeast Asian and European markets. At the same time, the company continues to strengthen overseas channel construction, draw on the domestic dealer model, and establish an overseas distribution network, which helps the company launch a full range of software+hardware products and solutions for customers and markets. Looking ahead to the whole year, the company's overseas orders are expected to grow rapidly. Considering the generally long execution cycle of overseas projects, we expect the company's overseas revenue to be reflected in 25 years.

Expenses continued to fall, and cash flow improved markedly. The company's expenses for the 24Q1-3 period were 0.23 billion yuan, the same -9.3%, the cost rate was 28.8%, and the same -0.8 pct, of which the Q3 period cost 0.08 billion yuan, -15.7%/-13%, the cost ratio was 26.9%, the same -0.1/-3.6pct; 24Q1-3 net operating cash flow was 0.17 billion yuan, the same +33.2%, of which Q3 operating cash flow was 0.1 billion yuan, +59.9% /+ compared to the same period. At 515.8%, cash flow improved significantly.

Profit forecast and investment rating: Considering that downstream demand may not improve significantly in the short term, we downgraded the company's 24-26 net profit to 0.2/0.23/0.28 billion yuan (original value was 0.23/0.29/0.35 billion yuan), +2%/15%/18% year-on-year, and current price corresponding valuations were 21x, 18x, and 15x, respectively. Considering that there is still broad scope for electricity side microgrid solutions, we maintained a “buy” rating.

Risk warning: macroeconomic recovery falls short of expectations, overseas expansion falls short of expectations, competition intensifies, etc.