The company's recent situation

The company announced that its application for a fixed increase was approved for registration by the Securities Regulatory Commission. The total amount of capital to be raised in this fixed increase (including issuance fees) does not exceed 1,079 million yuan, and the number of shares to be issued is 250 million. The funds raised will mainly be used to:

The first phase project for square lithium-ion batteries with an annual output of 12 GWh (annual output of 6 GWh), and the second phase project for high-energy high-safety power lithium-ion batteries and power systems with an annual output of 2 GWh.

The company announced that its holding subsidiary HiSida plans to establish a subsidiary in the Liuyang Economic and Technological Development Zone to invest in the construction of a 30GWh sodium ion and lithium ion battery and system production base project, with a total investment of about 10.2 billion yuan. The project is planned to be built in three phases: the first phase will invest about 3 billion yuan to build a 12 GWh square battery project; the second phase will invest about 3 billion yuan to build a 6 GWh cylindrical battery project; and the third phase will invest about 4.2 billion yuan to build a 12 GWh square battery project. The company plans to start construction of the first phase of the project before the end of 2023.

reviews

Increase the layout of the energy storage battery business and actively expand the scale of energy storage. As of 1Q23, the company had a production capacity of 3 GWh/year for three-yuan cylindrical lithium-ion batteries and 1.19 GWh/year for lithium iron phosphate lithium-ion batteries. The company's fixed increase of 1,079 million yuan is mainly used to support the first phase of the Haishida 12GWh square lithium-ion battery project (annual production of 6GWh) and the second phase of the high-efficiency high-safety power lithium ion battery and power system project with an annual output of 2 GWh/year. After the project is put into operation, it will add 1 GWh of ternary cylindrical lithium-ion battery production capacity and 6 GWh lithium-ion battery production capacity of lithium iron phosphate batteries respectively, which will help ease the delivery pressure caused by the company's insufficient energy storage capacity and full business orders. We expect the company's energy storage business to expand significantly in 2024. The company actively responds to rapidly growing downstream market demand, fully seizes market opportunities, and plans to build a 30GWh sodium ion and lithium-ion battery and system production base project. The project mainly revolves around products such as sodium ion batteries, large square lithium iron phosphate batteries, large cylindrical batteries, etc., which is conducive to rapidly improving the company's energy storage scale and automated production line capacity; we believe the company is expected to further reduce production costs and enhance the company's competitiveness through large-scale production capacity.

The cost of modified plastics has declined, and the company's gross profit is expected to continue to improve. 4-5M23, the average price of raw materials polypropylene/ABS/polyethylene/polycarbonate is -0.4%/-8.0%/-0.9%/-4.0%, respectively, compared to 1Q23. Costs continue to decline, and the gross margin of modified plastics is expected to increase month-on-month. Furthermore, the company is actively deploying modified plastics for new energy vehicles, and domestic NEV companies are highly receptive to domestic material suppliers, which is expected to drive the company's modified plastics revenue to continue to rise.

Profit forecasting and valuation

Due to the long investment and construction cycle of the company's 30GWh sodium ion and lithium-ion battery projects, we maintained a net profit of 584 million yuan/964 million yuan in 2024/2024. The current stock price corresponds to 23.7 times the 2023 price-earnings ratio and 14.4 times the 2024 price-earnings ratio. Maintaining an outperforming industry rating and maintaining the target price of 19.0 yuan, corresponding to 33.1 times the 2023 price-earnings ratio and 20.1 times the 2024 price-earnings ratio, there is 39.7% room for improvement compared to the current stock price.

risks

Prices of raw materials have risen; the volume of energy storage batteries has fallen short of expectations; and the volume of ICT materials has fallen short of expectations.