Last night's State Council executive meeting and this morning's "short essay," everyone should be aware by now. At the very least, it indicates one issue, and the problems of the large A market have also been reported to higher authorities. The subsequent market rescue measures will inevitably be more "advanced."
Against this backdrop, instead of guessing where the "bottom" is, it is better to look for those high-performing companies that have been mistakenly targeted. Because, once the market conditions improve, these companies are very likely to experience a valuation repair.
Take Sungrow Power Supply as an example.
On the evening of January 22, Sungrow Power Supply released a performance forecast, expecting a net profit of 9.3 billion to 10.3 billion yuan for 2023, a year-on-year increase of 159% to 187%; non-IFRS net profit of 9.15 billion to 10.15 billion yuan, a year-on-year increase of 170% to 200%.
Note that Sungrow Power Supply's net profit in 2023 may exceed the 10 billion yuan mark!
How should we view this performance?
From the company's perspective, 2023 was an extremely challenging year. Against this backdrop, the company's operating income exceeded 70 billion yuan, with the highest net profit reaching 10 billion yuan, which is actually quite commendable.
However, the capital market does not see it that way.
In the first three quarters of 2023, Sungrow Power Supply's net profit was 7.223 billion yuan, a year-on-year increase of 250%. This means that, looking solely at the fourth quarter, the net profit is only about 2.5 billion yuan, a sequential decline.
So here comes the question: since the performance increase in the first three quarters was "reasonable," then the business performance in the fourth quarter should also be entirely within expectations.This is why, when such a performance is announced, Sungrow did not open with a significant surge in its stock price.
However, what I want to say is that good is good, and bad is bad; the market is truly blind when it comes to pricing such a high-quality company so incorrectly.
Sungrow's main business includes photovoltaic inverters, energy storage systems, and new energy investment and development. According to relevant data, Sungrow's global shipment of photovoltaic inverters has been consistently in the second position for many years, and in 2022, the company's energy storage system shipments ranked first globally.
This at least indicates two issues:
First, the prosperity of the photovoltaic and energy storage industries is not as concerning as the outside world thinks; the market prosperity remains high. Second, the company's performance continues to grow at a triple-digit rate, which shows that Sungrow's market position has not been weakened but rather strengthened.
In a nutshell, both the industry and the company are very good; everyone has been too pessimistic before!
For the entire year of 2023, Sungrow's net profit margin is roughly around 13%, and the net profit growth rate has exceeded the revenue growth rate, indicating that Sungrow's profitability is continuously strengthening.
It needs to be particularly emphasized that, assuming Sungrow's net profit for 2023 is 10 billion yuan, then calculated based on the current market value, Sungrow's price-to-earnings ratio is less than 14 times.
Can you imagine that a company with a revenue compound annual growth rate of over 50% and a net profit compound annual growth rate of over 80% is now valued at only 14 times! Can you imagine that a global leader in the photovoltaic and energy storage market, at its worst, saw its market value drop by as much as 70%.
Of course, the capital market looks forward, past performance does not represent the future; the key is still to see what the future growth prospects are like?Let's first look at a set of data.
By the end of 2023, Sungrow Power Supply launched its latest equity incentive plan. The performance assessment criteria are based on the 2022 revenue, with the revenue growth rate for 2024-2027 not being less than 80%, 120%, 160%, and 200% respectively, and the net profit growth rate not being less than 120%, 140%, 160%, and 180% respectively.
Note that, even according to the performance assessment criteria of the equity incentive plan, the current valuation is very cheap!
Of course, this does not mean there are no risks.
In 2023, the investment in energy storage expansion exceeded 500 billion yuan, with a planned capacity of 900 GWh, most of which are billion-yuan-level projects. Currently, there is an overcapacity in various segments of the energy storage system, such as energy storage batteries, which have already dropped to 0.5 yuan/Wh. That is to say, for 2024, overcapacity remains the biggest ghost story in the photovoltaic energy storage industry chain.
However, there are a few points to add:
First, Sungrow Power Supply does not produce energy storage batteries but procures them externally, so it is actually a process of "decreasing both sales prices and production costs"; Second, once the Federal Reserve begins to cut interest rates, the return on investment for energy storage power stations will gradually increase, and market demand will further stabilize and warm up; Third, and most importantly, the company's valuation is already very cheap.
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