Description of the event
Hengdian Dongsha released its semi-annual report for 2023. 2023H1 achieved revenue of 10.246 billion yuan, up 9.35% year on year; net profit of 1,212 billion yuan, up 52.03% year on year; of these, 2023Q2 achieved revenue of 5.614 billion yuan, up 12.88% year on year, 21.21% month on month; net profit of 629 million yuan, up 45.84% year on year, and 7.93% month on year.
Incident comments
In terms of photovoltaics, 2023H1 achieved battery export sales of about 1.2 GW and module shipments exceeded 3.3 GW, driving the company to achieve revenue of 6.797 billion yuan, +15.95% year on year. Benefiting from the price reduction of upstream silicon-based materials and its own good market structure, the gross margin of the company's 2023H1 photovoltaic business reached 24.32%, +11.09 pct over the previous year. Looking forward to the future, the company's differentiated positioning is distributed and special products are black components, and its profitability is superior to the industry average. The first 6GW TopCon battery in Yibin, Sichuan is expected to go offline for the first time in August, and is also expected to increase profits.
In terms of lithium batteries, 2023H1 shipped 140 million lithium batteries, +36% year on year, revenue of 939 million yuan, and +15.45% year on year. In a situation where demand in the downstream electric two-wheeler and power tool industry is weak and market competition is intensifying, the industry's leading operating rate has been maintained by increasing the development of new products and markets. Revenue and shipments have both increased, and both revenue and shipments have increased, but overall profit contribution is not significant. Looking ahead, with the release of production capacity for the 6GWh high-performance lithium battery project, it provides room for further development of the company. At the same time, the company is also actively deploying products such as household storage and balcony energy storage, and has verified the shipment of household storage products in the Southeast Asian market.
In the magnetic materials sector, 2023H1 achieved a year-on-year decline in revenue due to a drop in average sales price. The company achieved revenue of 1,822 billion yuan, or -15.01% year-on-year, but the profit level was relatively stable, with gross margin increasing 3.22pct to 26.61% month-on-month. Looking forward to the future, in the magnetic materials sector, the company is expected to maintain steady growth in overall profitability by reducing its own costs and increasing efficiency.
In terms of expenses, 2023H1, the company accrued an asset impairment of 59 million yuan, all related to the decline in inventory prices; financial expenses were -167 million yuan, of which interest income was 91 million yuan, and exchange profit and loss - 108 million yuan. In addition, the company's management level has improved. 2023Q2, the management fee rate was 2.73%, a decrease of 1.03 pct over the previous month.
We expect the company's net profit to reach 2.30 billion yuan and 2.75 billion yuan in 2023 and 2024, and the corresponding PE is 12 to 10 times, respectively.
Risk warning
1. PV installation falls short of expectations;
2. Competition in the European market is intensifying.