On the evening of April 19, Sungrow (300274), the leader of photovoltaic inverters, disclosed its annual report that in 2021, the revenue will not increase, and the annual operating income will be 24.137 billion yuan, a year-on-year increase of 25.15%; net profit will be 1.583 billion yuan, a year-on-year decrease. 19.01%. The first quarterly report for 2022 will be released together with the annual report, with revenue and net profit of 4.568 billion yuan and 411 million yuan in a single quarter, a year-on-year increase of 36.48% and 6.26% respectively.
In the secondary market, after the "nearly 20 times a year" bull stock market, Sungrow has fluctuated downward since the end of October last year, with a drop of 44% in the past 6 months. The latest stock price is 90.1 yuan per share, with a market value of 133.8 billion yuan. . It is worth mentioning that the company's fixed increase of shares last year will be lifted on April 22. The issue price of the aforementioned shares is 128 yuan per share, and the current floating loss is nearly 30%.
Net profit fell by nearly 20%
Judging from absolute data, Sungrow's net profit in 2021 will be 1.583 billion yuan, a year-on-year decrease of 370 million yuan. Splitting the profit data of each quarter, the company’s growth momentum in the first half of the year was acceptable, but due to the significant increase in raw material prices and shipping costs, there was a sign of decline in the third quarter. Net profit in the quarter was 748 million yuan, a slight decrease of 0.19% year-on-year; In the fourth quarter, the company's profit further declined. The single-quarter net profit was only 77.93 million yuan, a year-on-year decrease of 680 million yuan, a drop of nearly 90%, which directly swallowed up the growth in the first three quarters and became the main reason for dragging down the annual performance.
In addition to the increase in operating costs and various expenses, one of the reasons for the increase in revenue but not profit is that the impairment losses of various assets accrued have increased significantly. In 2021, the company accrued 480 million yuan for impairment losses on accounts receivable and inventories, an increase of over 400 million yuan year-on-year, an increase of nearly 6 times, and a direct deduction of 480 million yuan from the current year's operating profit.
However, behind the increase in asset impairment is the continuous expansion of the company's business scale and its optimism about future industry prospects. In 2021, Sungrow's photovoltaic business segment recorded revenue of 18.9 billion yuan, an increase of 18% year-on-year, of which power conversion equipment such as photovoltaic inverters contributed half of the country's total. 27% increased to over 30%; the energy storage business revenue was 3.138 billion yuan, a year-on-year increase of 168.51%.
At the same time, in response to rising raw material prices and ensuring supply in overseas markets, the company has increased stocking efforts. By the end of 2021, the inventory balance will reach 10.77 billion yuan, a year-on-year increase of 178%, of which raw materials and inventory commodities account for nearly 70%; Taking the product photovoltaic inverter as an example, the inventory at the end of 2021 will be 18GW, doubling year-on-year. In the first quarter of 2021, the company's inventory balance further increased to 13 billion yuan.
In terms of gross profit margin performance, Sungrow's 2021 comprehensive gross profit margin was 22.25%, down 0.82 percentage points from the same period of the previous year. Among them, the gross profit margins of power conversion equipment and energy storage systems were 33.8% and 14.11%, both of which declined.
At the beginning of the annual report, Sungrow stated that the competition in the photovoltaic inverter market is still very fierce. If the leading edge in technological innovation, new product development and cost control cannot be maintained, the product will face the risk of declining gross profit margins. Based on this, Sungrow's R&D expenses have maintained high growth all year round. In 2021, R&D investment will be 1.16 billion yuan, a year-on-year increase of 44%, accounting for 4.81% of revenue; there are 2,734 R&D personnel, accounting for more than 40% of the total number of employees.
Regarding the price of main products, the company has previously stated in investor surveys that the price of inverters in 2022 should be relatively stable. On the one hand, a third-party agency predicts that the global installed PV capacity is expected to be 220GW next year, and the market demand is huge; on the other hand, the supply of upstream power devices for inverters is still relatively tight, and it is unlikely that the market will cut prices in this context.
Energy storage business creates new growth poles
If the photovoltaic business is the basic business of Sungrow, then the energy storage business is a new growth pole that the company is striving to build. In 2014, the company launched the energy storage business. In the past two years, the growth of this business segment has been strong, and the revenue has doubled year by year. In 2021, it will reach 3.1 billion yuan, a year-on-year increase of 168.51%. Rapidly jumped to 13%; the annual energy storage system shipments increased exponentially, with global shipments reaching 3GWh that year, an increase of 275% compared with 800MWh in the previous year, ranking first for five consecutive years.
In terms of business model, Sungrow is mainly engaged in the integration of energy storage systems, and adopts a cell-free strategy, that is, in addition to the outsourcing of cells, PCS, PACK, EMS, and BMS are all independently developed and produced to ensure the deep coupling of the entire system. At present, the company The 1500V full-scenario energy storage system solution has become the key supporting technology for the large-scale development of new energy + energy storage under the current pressure of solar energy storage parity; and in terms of customer structure, the company's existing inverter and energy storage business customers It has high coincidence and has a first-mover advantage in market development. At present, energy storage systems have been widely used in mature power markets such as the United States, Britain, and Germany.
In 2021, the maximum capacity of a single energy storage system contracted by Sungrow will reach 900MWh, and several demonstration projects have been launched, including the Three Gorges Ulanqab source-grid-load-storage integration demonstration project, the largest 136.24MWh solar-storage integration power station in Southeast Asia, The largest energy storage project of 430MWh in Israel, etc. However, affected by the rising prices of raw materials and shipping, the gross profit margin of the energy storage business for the year was only 14.11%, down 7.86 percentage points year-on-year.
With the improvement of the distribution and storage requirements of large-scale wind and solar bases and the improvement of time-of-use electricity price policies in Zhejiang, Guangdong and other places, the demand for energy storage on the power generation side and the user side is expected to be released. The Sinolink Securities Research Report pointed out that the company's energy storage business is mainly energy storage system integration. According to the cost of energy storage system of 1~1.5 yuan/Wh, the value of this business unit is about 5~7 times that of inverters. Even with the sharp rise in raw material costs, the installed capacity of energy storage has doubled this year. With the fall in raw material prices next year, the market demand for energy storage is expected to exceed expectations.
Market demand is expanding, and Sungrow's capacity expansion is also on the way. In 2021, the company will complete the fixed increase of 3.623 billion yuan for the construction of 100GW new energy power generation equipment manufacturing base, expansion of R&D innovation center, global marketing service system and other projects. The production capacity of inverter products will increase by 70GW, 15GW and 15GW respectively. However, with the recent drop in the company's share price, the aforementioned fixed increase shares are currently floating losses of nearly 30%.
