2022 results are slightly below our expectations
The company announced revenue of 74.599 billion yuan in 2022, a year-on-year decrease of 12.9%; Guimu's net profit was 1,796 million yuan, an increase of 38.2% over the previous year. Among them, 2H22's revenue was 43,572 billion yuan, down 11.7% year on year, up 40.4% month on month, and Guimu's net profit was 1,037 million yuan, an increase of 62.4%/36.4% over the same period last year. Due to: 1) the rise in lithium battery raw materials, which led to an increase in losses in the lithium battery sector; 2) asset impairment, which was affected by the impairment of lithium battery raw material inventories in 4Q22 (we expect about 7-80 million yuan), the company's 2022 performance was slightly lower than our expectations.
Development trends
The lead-acid power battery business grew steadily, and profit recovery was realized. Benefiting from the steady growth and concentration of downstream electric two-wheeler demand, the company's lead-acid battery shipments in 2022 achieved 100.3 GWh, an increase of 8.3%, including 96.3 GWh of two-wheeler lead-acid batteries, start-stop, and special batteries totaling about 4 GWh. At the same time, the price of the company's downstream auxiliary materials such as sulfuric acid and tin increased in 2022, ASP increased, and the total revenue of the lead-acid business reached about 32.81 billion yuan, an increase of 12.6%, which also led to profit recovery. Our overall lead-acid battery gross margin increased by 16.3.3ppt to 16.3.3ppt. Count as one tile Net profit per hour reached more than 0.02 yuan, and there is still room for recovery compared to 2020 (net profit of about 0.025 yuan per watt-hour). We are optimistic that lead-acid business profits will continue to rise in 2023.
Profits in the lithium battery business are under pressure, and the industrialization of sodium electricity is advancing at an accelerated pace. The company shipped 1.99 GWh of lithium batteries in 2022, an increase of 23.6%, and achieved revenue of 1,602 billion yuan, an increase of 62.3%. By business, energy storage shipped about 600 MWh+, with revenue of 524 million yuan, an increase of 353.5%, and two-wheelers and 3C lithium batteries shipped about 1.35 GWh+, with total revenue of 1,078 million yuan, an increase of 23.7%. On the profit side, due to the impact of upstream lithium carbonate price increases, lithium battery business profits are under pressure. We expect the company's lithium battery losses to increase in 2022. Looking ahead to 2023, we are optimistic that the high demand for energy storage will be combined with the release of new production capacity, energy storage battery shipments will maintain a high growth rate, and the prices of middle and upstream raw materials have entered a downward cycle, which is expected to drive lithium battery profit improvement. The company is also accelerating the industrialization of sodium batteries. Currently, samples have been sent downstream, and plans to develop 1 GWh production capacity in 2023, which will be applied first to two-wheelers, and backward energy storage promotion.
Lead-carbon energy storage achieved a breakthrough of 0-1 and is expected to continue to be released in 2023. The company simultaneously deployed lead-carbon energy storage to meet the needs of specific scenarios. In 2022, the company shipped about 500 MWh, achieving revenue of 128 million yuan, an increase of 225.1% over the same period, and strong growth. The company previously announced the signing of a 30GWh lead-carbon energy storage order with Taihu Energy Valley and the phased construction of 10GWh lead-carbon energy storage capacity in Ma'anshan. We expect lead-carbon energy storage to be further released in 2023, and with the release of scale effects, the gross profit margin of lead-carbon energy storage (currently about 11-12%) is expected to rise to the same level as lead-acid power batteries (about 17%).
Profit forecasting and valuation
Considering the possibility of potential delays in downstream energy storage bidding/delivery due to falling prices of upstream raw materials, we lowered the company's 2023 profit forecast by 13% to $2,356 million, while introducing the 2024 profit forecast of $3,077 million. Considering the restoration of Hong Kong stock valuations, we kept the target price of HK$11.0 unchanged and outperformed industry ratings. The current stock price and target price correspond to 2023/2024 3.8x/ 2.8 P/E and 4.6x/3.5x P/E, with room for 18.0% upward.
risks
Domestic sales of electric two-wheelers fell short of expectations, and the price increase of upstream raw materials exceeded expectations.