Dongfang Caifang Securities has initiated coverage of Hokang New Energy, assigning it a “buy” rating. The company recently published its annual report for 2024, revealing a significant increase in revenue to 4.776 billion yuan, representing a year-on-year growth of 220.31%. Furthermore, the net profit attributable to shareholders reached 10.2961 million yuan, marking a successful turnaround from losses. The net cash flow from operating activities also saw a remarkable rise to 306 million yuan, an increase of 147.79% compared to the previous year.
Hokang New Energy has deepened its involvement in the industrial drive sector, primarily focusing on high-voltage variable frequency drives, while also expanding its business into green energy solutions. This includes residential and commercial photovoltaic EPC projects, residential energy storage, photovoltaic grid-connected inverters, and high-voltage variable frequency drives. The company benefits from comprehensive support and brand authorization from <b>Midea Group</b>, its controlling shareholder, which enhances its competitive edge.
The partnership with Midea Group provides significant resources, empowering Hokang New Energy in various domains such as R&D, manufacturing, supply chain, and global sales. The brand authorization allows the company to utilize the "Midea" brand for its photovoltaic EPC, residential green energy, and grid-connected inverter businesses.
Through Midea Group's digital empowerment, Hokang has improved its overall operational efficiency, achieving a labor efficiency ratio that is double that of its industry peers, establishing a clear differentiation advantage. The company continues to invest resources in core value chain activities like research and development and manufacturing, building its capabilities in both hardware and software systems. It has established two R&D bases and actively collaborates with Midea Group's various research institutions and third-party certification bodies to promote technological innovation and core technology development.
New products are being launched, and the proportion of high-margin products is expected to increase. In response to international customer demands, the company has developed the first-generation self-researched residential energy storage single-phase all-in-one machine and the first-generation self-researched three-phase stacked all-in-one machine. Additionally, the <b>800W balcony photovoltaic solution</b> has successfully been released, featuring a self-developed micro-inverter and flexible photovoltaic modules, offering advantages in installation flexibility and efficient power generation.
<b>Investment Recommendation:</b> With Midea Group's comprehensive support, Hokang New Energy is poised for differentiated breakthroughs in the light-storage sector. We forecast the company will achieve revenues of <b>6.4 billion</b>, <b>8.1 billion</b>, and <b>9.9 billion yuan</b> in 2025, 2026, and 2027, respectively. The net profit attributable to shareholders is projected to be <b>100 million</b>, <b>200 million</b>, and <b>320 million yuan</b>, with earnings per share (EPS) of <b>0.09</b>, <b>0.18</b>, and <b>0.29 yuan</b> per share, resulting in price-to-earnings (PE) ratios of <b>55</b>, <b>28</b>, and <b>17</b> times, based on the closing price on April 14, 2025. We initiate coverage with a "buy" rating.
<b>Risk Warning:</b> Potential risks include lower-than-expected photovoltaic demand, slower-than-anticipated new product development, and intensified industry competition.
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