A description of the event. The company released its 2023 annual report. In the first half of the year, it achieved operating income of 4.889 billion yuan, or 35.94% of the same period; realized net profit of 65 million yuan, or -91.49% of the same period; and achieved non-net profit of 0.3 billion yuan, or -95.80% of the same period.
The period of downturn has passed, and a positive trend has been established for the future. The first half of the year was constrained by large fluctuations in raw material prices and heightened downstream wait-and-see sentiment. Company orders and product prices were under pressure, yet it was still at the forefront of domestic shipments of ternary cathode materials.
Looking at a further breakdown, Q2 achieved operating income of 2,955 million yuan, +52.79% month-on-month, and net profit of 64 million yuan, or +6741.42% month-on-month, mainly due to strengthening supply chain management, optimizing cost control, and continuously optimizing processes. Looking forward to the future, the company relies on the platform advantages of the actual controller China Minmetals to ensure the supply of raw materials. The technical advantages accumulated over many years meet the needs of downstream customers, the diversified production capacity layout expands new profit growth points, and the high integrated precursor layout continues to reduce costs, thus striving to achieve positive business development.
The product matrix is becoming more and more rich, and the technical level has been demonstrated. 1) Precursors: Independent research and development of key core equipment, precursor reactors, further large-scale application, promotion of next-generation high-efficiency concentration system production lines, and iterative upgrades of intermittent processes. Precursor particle size grading technology has achieved the first industrial application in the industry, which strongly confirms the company's deep accumulation in the precursor industry. 2) Ultra high nickel monocrystals: Delivered at the 100-ton scale, and passed the review of the large cylindrical power battery project. The stability of the second-generation high-power high-nickel NCA has been improved to achieve 100-ton delivery.
The cost of high-pressure quick-charging medium and high nickel ternary materials was further reduced, and the stability samples of production line batches passed the customer's evaluation.
3) Lithium iron phosphate: Complete batch stability verification and small-batch trial production. 4) Sodium electro layered materials: There are research developments in layered oxide, Prussian blue, and polyanion routes. Samples of layered oxide routes have been evaluated by customers, and their performance is excellent. Up to now, sodium cathode materials have been shipped in small quantities.
Diversified production capacity is built in an orderly manner, and platform-based advantages are established. The second phase of the automotive lithium battery cathode material expansion project and the lithium iron phosphate project with an annual output of 60,000 tons are being promoted in an orderly manner. Some production lines have already been put into operation, and are expected to be fully completed and put into operation this year. Focusing on the future, the company plans to invest 10 billion yuan to build a comprehensive industrial base project for high-performance lithium battery materials in Fuqing City, mainly to build ternary cathode materials (supporting the ternary precursor production line) and lithium iron phosphate cathode materials. Diversified production capacity building goes hand in hand to meet customer needs. The overseas market space is vast. In March, the company and Axens signed a memorandum of cooperation on ternary cathode materials and ternary precursors in France, laying a good foundation for subsequent overseas trips.
Investment suggestions: We expect the company to achieve revenue of 152.08/178.48/21.07 billion yuan in 2023-2025, with a year-on-year ratio of -15.4%/+17.4%/+18.1%; net profit to the parent is 476/798/1,105 million yuan, respectively, -68.1%/+67.8%/+38.4%. On August 18, the corresponding PE was 40x/24x/17x. Since the company relies on state-owned assets and has strong resilience to risks, the product and customer structure continues to be optimized, and the “recommended” rating is maintained.
Risk warning: Sales of new energy vehicles fell short of expectations, industry competition intensified, fluctuations in raw materials exceeded expectations, and the pace of production capacity release fell short of expectations.