Matters:
In 2023, H1 revenue was 4.89 billion yuan, or 35.94% year on year; net profit of 65 million yuan, -91.49% year on year; net profit after deducting non-attributable net profit of $30 million, -95.80% year on year. Gross profit margin 5.80%, year on year -11.47 pct; net interest rate 1.32%, year on year -8.61 pct.
Commentary:
The market is picking up, and 2023Q2's revenue and profit have increased month-on-month. 2023Q1 is affected by downstream companies' optimization of inventory structures and fluctuations in raw material prices. The growth rate of the NEV market has slowed, and the company's shipments and revenue have all been affected. However, since 2023 Q2, consumer promotion policies have been implemented frequently, and terminal car sales and battery demand have picked up. In 2023Q2, the company also achieved revenue of 2,956 billion yuan, an increase of 52.79% over the previous month. After deducting non-attributable net profit of 51 million yuan, losses were reversed and corrected month-on-month.
Key projects continue to advance, and supply chain management is optimized. The company is progressing in an orderly manner the second phase of the automotive lithium battery cathode material expansion project and the lithium iron phosphate optimization supply chain management project with an annual output of 60,000 tons. After the above projects achieve production results, the company's cathode material production capacity will be further increased. The company has successively signed strategic procurement agreements with leading upstream enterprises to enhance supply flexibility, deepen inventory management, establish inventory management mechanisms, adjust inventory strategies in a timely manner based on market changes in raw material prices, and respond to market changes.
The first-mover advantage of technology is remarkable, and new progress has been made in industrial applications. After years of technology accumulation and industrialization experience, the company has formed a first-mover advantage in the field of ternary cathode materials, and has successfully entered the supplier system of mainstream lithium battery manufacturers such as Ningde Era, BYD, Everweft Lithium Energy, and Sunwoda. During the reporting period, the company made new progress in a number of technological developments. Precursor reactors have been further expanded, a new generation of high-efficiency concentration system production lines have been promoted, precursor particle size grading technology has pioneered industrialized application in the industry, ultra-high nickel monocrystalline cathode materials have been shipped in the 100-ton scale, passed the review of the large cylindrical power battery project, the stability of second-generation high-power high-nickel NCA has been improved and delivered at the 100-ton level, and lithium iron phosphate materials have completed batch stability verification and small-batch trial production. 1 new invention patent and 2 utility model patents have been obtained.
Investment suggestions: The growth rate of the terminal NEV market slowed in 2023, and the company was under price pressure as an upstream cathode material supplier. Although the market has picked up since Q2, overall profit is still under great pressure. We adjusted the company's net profit forecast for 2023-2025 to 3.34/827/1,074 million yuan (original value: 952/15.33/1,986 billion yuan), and the current market value corresponding to PE is 54/22/17 times, respectively. The company continues to explore new technology fields and expand its lithium iron phosphate business. We believe there is still great potential for growth. Referring to comparable company valuations, 27xPE was given in 2024, corresponding to a target price of 11.58 yuan, and maintained a “strong promotion” rating.
Risk warning: New energy vehicle market demand falls short of expectations, market competition intensifies, raw material supply and price fluctuations, technology route substitution, etc.