Performance review
2022 results are in line with market expectations
The company announced its 2022 results: the company achieved operating income of 4.64 billion yuan, an increase of 65.5% over the previous year; achieved net profit of 502 million yuan, a decrease of 5.4% over the previous year; and achieved net profit of 502 million yuan after deducting non-return mother's net profit, an increase of 3.7% over the previous year, which is basically in line with the performance report and is in line with market expectations.
Development trends
Shipments and production capacity are progressing steadily, supporting rapid revenue growth. In 2022, the company's copper foil shipments reached 49,000 tons, an increase of 77% over the previous year. Among them, copper foil shipments of 6 microns and below increased sharply by 117% year on year to 40,000 tons, accounting for +15ppt to 82% of total shipments. In terms of production capacity, the company expects total production capacity to double from 2022 to more than 100,000 tons. Among them, Baidu Jiayuan's high-performance copper foil project with an annual output of 31,000 tons has been fully put into operation, the Ningde Jiayuan project with an annual output of 15,000 tons began trial production in February 2023, the Shandong Jiayuan high-precision ultra-thin electronic copper foil project has been put into production capacity of 10,000 tons, and the Jiangxi Jiayuan electrolytic copper foil project with an annual output of 20,000 tons started trial production in December 2022, Jiangxi Jiayuan produces 35,000 tons of electrolytic copper foil per year, the Ningde Jiayuan project, which produces 35,000 tons of electrolytic copper foil per year Annual output 1.5 Construction of the 10,000-ton high-performance copper foil project is being accelerated, and the Guangdong Jiayuan high-performance electrolytic copper foil construction project with an annual output of 100,000 tons, set up in a joint venture with Ningde Times, is scheduled to commence trial production in the second half of 2023. On the customer side, the company actively developed new customers, adding 60 new customers throughout the year, bringing the total number of cooperative customers to 138.
The decline in processing costs per ton has put pressure on profitability. The reduction in processing costs per ton of copper foil caused the net profit per ton to drop 46% year on year to 10,000 yuan, and the company's gross margin was -10ppt to 20% year on year. The company's expense management level is good. The cost rate for the period was +4% to 270 million yuan compared to the same period, and the corresponding period fee rate was -3ppt to 6% year over year. In summary, the company's net profit margin was -8ppt to 11% year-on-year. We believe that processing fees in the copper foil industry are expected to stabilize in the future, and the company's gross margin is expected to bottom out and stabilize. In the future, as new production capacity is put in place one after another, performance is expected to resume steady growth.
The proportion of high-performance products is expected to increase, and the deployment of the composite copper foil field will be accelerated. 1) The company signed a memorandum of understanding with Ningde Times. Ningde Times plans to purchase no less than 20,000 tons of 4.5 micron and 5 micron high-end lithium battery copper foil from the company in 2023. Currently, the company has been steadily supplying 4.5 micron and 5 micron products in batches to some customers. We expect the company's share of shipments of high margin products such as 4.5 micron and 5 micron copper foils to continue to increase.
2) The company is continuously speeding up research and development in the field of composite copper foil. At present, a new PET composite copper foil test workshop has been built and pilot equipment has been purchased. Production and samples will be gradually arranged to downstream customers for product verification later. We believe it is expected to further enrich the product structure and enhance the company's overall competitiveness.
Profit forecasting and valuation
Considering the decline in the company's profit per unit due to the decline in copper foil processing fees, we lowered the 2023 profit forecast by 37% to 700 million yuan, and introduced the 2024 profit forecast of 1.0 billion yuan for the first time. The company is currently trading at 19.0/13.3x 2023/2024 price-earnings ratio. Considering that the company is a copper foil leader, locks in orders from large customers in the medium to long term, and is expected to increase market share with the release of production capacity, the target price was lowered 15% to 60 yuan, corresponding to the 26.0/18.3x 2023/2024 price-earnings ratio and 37% room for increase; maintaining outperforming the industry rating.
risks
There is a risk that sales of new energy vehicles will fall short of expectations, the competitive pattern of the industry will deteriorate, and processing fees will fall beyond expectations.