A description of the event. On March 24, 2023, the company released its 2022 annual report. It achieved annual revenue of 41,882 billion yuan, an increase of 8.18% over the previous year, and achieved net profit of 1,908 billion yuan, an increase of 39.35% over the previous year. After deducting net profit of 1,545 million yuan, an increase of 49.04% over the previous year.

Q4 Performance split. Revenue and net profit: The company's 2022Q4 revenue was 11.840 billion yuan, -1.06% year on year, -7.60% month on month, net profit of the mother was 483 million yuan, 59.07% year on year, -28.15% month on month, net profit of the mother after deduction was 458 million yuan, 74.26% year on year, -21.41% month on month. Gross profit margin: 2022Q4 gross margin was 21.28%, 9.21pcts year on year and 3.16pcts month-on-month. Net interest rate: 2022Q4 net interest rate was 3.76%, 1.44pcts year on year, -1.41pcts month-on-month. Expense rate: The company's expense rate for the 2022/Q4 period was 9.98%, compared to 3.97 pcts. Among them, the sales, management, R&D and financial expenses rates were 3.49%, 2.75%, 3.72%, and 0.03% respectively.

The lead-acid battery business is growing steadily. Lead-acid battery sales revenue in 2022 was 37.397 billion yuan, with shipments reaching 100 million kVAH, an increase of 11.62% over the previous year. Among them, lead-acid batteries for electric light vehicles sold 36.035 billion yuan, an increase of 11.40% over the previous year, thanks to the company's continuous cooperation with light vehicle manufacturers and the strong sales network of hundreds of thousands of stores across the country. In 2022, lead-carbon energy storage revenue was 165 million yuan, an increase of 238.57% over the previous year. The Taihu Energy Valley Energy Storage Project will purchase the company's 30 Gwh lead-carbon batteries in the next three years, and the energy storage policy will continue to benefit the lead-carbon energy storage business.

The performance of the lithium battery business is growing rapidly, and the industrialization of sodium power is being implemented quickly. Lithium battery shipments reached 199 Gwh in 2022, and business revenue was 1,644 million yuan, an increase of 64.93% over the previous year. It was broken down into the light vehicle power battery business of 642 million yuan and the energy storage business of 563 million yuan. In 2022, lithium batteries have achieved mass production of 180Ah cells and sampled 280Ah cells, and two air-cooled and liquid-cooled modules have been developed. The company has accelerated the penetration of the lithium battery energy storage market. It plans to have a lithium battery production capacity of 14 Gwh by the end of 2023 (LFP square accounts for 7 Gwh) and reach 30 Gwh by 2025, focusing on the energy storage sector, including large-scale domestic energy storage power plants, industrial and commercial energy storage, and overseas industrial, commercial and household fields. In 2022, the company's new sodium battery products were cycled more than 2,000 times, and a 300MW pilot production line has been built, and the fields of power applications and energy storage will be developed in the future. We expect that next year there will be a big increase in energy storage battery shipments and an increase in the share of energy storage business.

Hydrogen fuel cell products are emerging, speeding up the overall industrial layout. The revenue of hydrogen fuel cells in 2022 was 64 million yuan. The company's fuel cell R&D product indicators reached the industry-leading level. In 2023, 3,000 fuel cell systems and parts production lines will be officially put into operation, speeding up downstream commercial vehicle and marine applications.

Investment advice: We expect the company to achieve revenue of 499.60, 58994, and 68.295 billion yuan in 2023-2025, net profit of 25.85, 30.87 billion yuan, and 3,914 billion yuan respectively. PE corresponding to the closing price on March 24 is 13x/11x/9x. The company is a leading company in the lead-acid battery field. As lithium battery, sodium power, and fuel cell businesses go hand in hand, the company has a clear growth curve and maintains a “recommended” rating.

Risk warning: risk of new product technology replacement, risk of R&D investment not meeting expectations, downstream demand falling short of expectations