1H22 performance is in line with our expectations
The company announced 1H22 results: revenue of 31.026 billion yuan, down 14.2% from the same period last year; net profit of 760 million yuan, corresponding to 0.67 yuan per share, an increase of 14.9% over the same period last year, and the performance was in line with expectations.
Trend of development
Traditional business profit repair, robust demand. The sales volume of lead-acid batteries in 1H22 is about 40GWh, corresponding to 14.2 billion yuan in revenue, an increase of 8.34% over the same period last year. 1) Electric two-wheel / tricycle lead-acid batteries shipped about 141 million units in the first half of the year, with revenue of 13 billion yuan, 8.3% over the same period last year, and market share has increased year by year. 2) car start-stop batteries shipped 1.38 million units, revenue 239 million yuan, about 38% year-on-year, channel optimization and customer expansion effect is remarkable; 3) special vehicle power battery shipments of 735000 units, corresponding revenue of about 300 million yuan, an increase of 22% over the same period last year. Benefiting from the adjustment of the pricing mechanism since 4Q21, the gross profit margin of the company's 1H22 traditional lead-acid business has returned to 14.5-15.0%. We expect that with the decline in the price of upstream accessories, there is still room for upward revision of the company's gross margin in the second half of the year.
Lithium battery energy storage achieved a breakthrough, actively expanding production to support 23 years of performance growth. 1H22's energy storage business earned 280 million yuan in revenue, a year-on-year increase of nearly 32 times. Among them, lithium-ion battery energy storage revenue of 206 million yuan, to achieve a breakthrough of 0 to 1. The company will produce about 1GWh by the end of 2021 and plan to upgrade to 4G who by the end of 22. In 23 years, the company will further expand to 10GWh and accelerate the expansion of production capacity.
In terms of shipping structure, about 50% of the company's shipments are sold overseas, and it is expected that the proportion of exports will remain high in the next 1-2 years. We believe that the energy storage business is expected to become the company's second growth curve, benefiting from the high global demand for energy storage and the high gross margin of overseas operations.
The recovery of lithium electricity is profitable, and production is expanded to meet the industry tide. Lithium recycling business 1H22 achieved revenue of 379 million yuan, we expect a net profit of about 37 million yuan, annual revenue may reach 700-800 million yuan. At present, the company has a production capacity of about 10,000 tons and is actively planning to expand production. It has signed an investment agreement with the Binhai people's Government of Jiangsu Province to invest 100000 tons. The company plans to complete the first phase of 60,000 tons capacity and put into production at the beginning of 2024.
We believe that the scrapping peak of the first batch of new energy power batteries or after 2025, the company will speed up the layout of lithium battery recycling, which is expected to meet the growth dividend period of the industry.
Profit forecast and valuation
The downstream price increase drives the profit repair of the traditional business. We raise the company's profit forecast for 2022Universe 2023 by 10% to 2.772 billion yuan. At the same time, the company's energy storage business accelerated expansion drives the valuation center to move up. We raise the company's target price by 22.2% to HK $11.00. The current stock price corresponds to 2022 4.2x/3.2x 2023 5.3x/4.0x Pamp E, and the target price corresponds to 2022 apt 2023. There is 21.7% upside space to maintain an outperforming industry rating.
Risk
The sales of electric tricycles in China are lower than expected, and the capacity construction of energy storage and recycling business is not as expected.