Incident: Tianneng Co., Ltd. released its annual report. In 2022, the company achieved operating income of 41,882 billion yuan, +8.18% year on year; net profit of Guimu was 1,908 billion yuan, +39.35% year on year; net profit of non-return mother was 1,544 billion yuan, +49.04% year on year; Guimu's net assets were 13.675 billion yuan, +11.44% year on year; total assets of 32.377 billion yuan, +21.37% year on year.

Comment: Lead-acid battery business: Power batteries are progressing steadily, and lead-carbon energy storage is poised to develop. The company's lead-acid battery business increased steadily in 2022. The main downstream of the company's lead-acid batteries are electric light vehicles. In this field, lead-acid batteries still dominate the market with their advantages such as high cost efficiency and high safety. At the same time, the company is committed to integrating R&D, sales and service, continuously strengthening cooperation with mainstream electric light vehicle manufacturers, further forming a complete sales and service network, which has led to a steady increase in the company's revenue, achieving sales of electric light vehicle lead-acid batteries of 36.034 billion yuan throughout the year, +11.40% over the same period last year. The large-scale expansion of the energy storage industry has led to a sharp increase in the company's demand for lead-carbon energy storage products. The annual revenue of lead-carbon batteries was 165 million yuan, +238.57% over the previous year. As a high-safety energy storage product, there is still plenty of room for development in the future. In December 2022, the company disclosed that it has cooperated with Taihu Energy Valley in the field of lead-carbon batteries. The total number of lead-carbon battery cells using Tianneng Co., Ltd. in Taihu Energy Valley will not be less than 30 GWh within the next three years.

Emerging battery business: Lithium battery energy storage drives development, and hydrogen fuel cells continue to break through. In 2022, the company's lithium battery business and hydrogen fuel business developed rapidly, and technology research and development continued to make breakthroughs. In terms of lithium battery business, the company achieved revenue of 1,643 million yuan, +64.93% over the same period last year. Among them, the energy storage sector achieved revenue of 563 million yuan. The company also made the energy storage business a priority for the future development of lithium batteries. In terms of hydrogen fuel cell business, the company has achieved phased results in the fields of electric stacks, membrane electrodes, and catalysts. It is actively exploring related application fields such as logistics vehicles, loaders, heavy trucks, ships, etc., while accelerating the overall industrial layout. It has strengthened industrial cooperation with Xiamen Jinlong, Gerun Times, and Guohong Hydrogen Energy. The company has achieved operating income of 64 million yuan in the hydrogen fuel cell field throughout the year, and the blue ocean market is full of potential.

Investment advice: We forecast that the company's net profit for 2023/2024/2025 will be 23.62/29.84/3.5 billion yuan respectively, +24%/+9%/+7% year on year, EPS will be 2.43/3.07/3.60 yuan respectively, and the corresponding PE will be 14/11/10 times respectively, maintaining the “buy” rating.

Risk warning: Demand for lead-acid batteries fell short of expectations, and demand for energy storage fell short of expectations.