Deye(SH:605117) Huafu Securities·2024-03-21 16:00Investment Rating - The report gives a "Buy" rating for the company with a target price of 121.65 CNY per share, based on a valuation of 22 times earnings for 2024 [4][6]. Core Views - The company, a veteran in the home appliance industry, has rapidly entered the photovoltaic inverter market, achieving significant revenue growth driven by its inverter business, which has seen a compound annual growth rate (CAGR) of 31.65% from 2017 to 2022 [1][25]. - The global demand for distributed solar storage is expected to rise significantly, with the company strategically avoiding saturated markets and focusing on emerging markets like Brazil and South Africa [2][9]. - The company's products emphasize differentiation and cost-effectiveness, leading to increased market share and profitability, with inverter gross margins surpassing industry averages [3][28]. Summary by Sections Company Overview - The company has over 20 years of experience in the electrical industry and has transitioned into the photovoltaic inverter sector since 2016, launching its first energy storage inverter in 2017 [1][18]. - The stable and concentrated shareholding structure promotes growth, with the actual controller holding 62.53% of the shares [19][23]. Market Dynamics - The report anticipates a CAGR of 36% for global photovoltaic installations from 2022 to 2025, with distributed solar expected to benefit from declining costs and increasing penetration rates [2][50]. - The energy crisis has led to soaring electricity prices, particularly in Europe, driving demand for household energy storage solutions [36][42]. Product Differentiation and Cost Control - The company’s low-voltage energy storage inverters have unique features, including a power range of 3-16KW and competitive pricing, which has helped it gain market share [3][28]. - The company has maintained a declining expense ratio, which fell from 13.32% in 2017 to 7.37% in 2022, while also increasing R&D investment significantly [28][30]. Financial Forecast and Investment Recommendations - Revenue projections for 2023-2025 are 77.3 billion, 96.8 billion, and 124.1 billion CNY, with net profits expected to grow by 19%, 32%, and 29% respectively [4][12]. - The company’s gross margin is expected to remain competitive, with a forecasted decline in overall gross margin due to industry competition [9][12].