In 2023Q2, the company achieved net profit of 40 million yuan, -24.40% year-on-year, reversing losses month-on-month; after deducting non-attributable net profit of 55 million yuan, +3.45% year-on-year, reversing losses month-on-month. The company is a leading domestic lightweight power lithium battery enterprise. Its business covers lithium-ion batteries for light vehicles, energy storage batteries, consumer batteries and lithium-ion batteries, accounting for more than 60% of export sales. In the short term, due to factors such as overseas inflation, European inventory removal, and raw material price fluctuations, etc., the company's light power business demand is under pressure, but by developing electric motorcycle markets in Southeast Asia, India and other places, the company is expected to contribute new growth momentum. In terms of energy storage, the company focuses on household and portable energy storage products, benefiting from the rapid growth in demand in emerging markets such as South Africa. At the same time, it is also actively expanding industrial and commercial energy storage to enrich the energy storage product line, and is expected to achieve volume growth driven by demand. Overall, we are optimistic that the company's future performance is expected to continue to be repaired, driven by the light power market such as electric motorcycles and energy storage demand. Referring to the valuation of comparable companies, the company was given a target market value of 3.8 billion yuan in 2023, corresponding to a target price of 38 yuan/share, and maintain a “buy” rating.
Event: On the evening of August 24, Briway released its semi-annual report for 2023. Our comments on this are as follows:
23Q2 deducted non-net profit of 55 million yuan, turning a month-on-month loss into a profit. 2023H1 achieved revenue of 1,279 million yuan, +3.87% year-on-year; net profit of 35 million yuan, or -55.69% of the same period; net profit of non-attributable income of 52 million yuan, -32.76% year-on-year. Among them, 2023Q2 achieved revenue of 786 million yuan, +14.72% year on year, +59.77% month on month; net profit of 40 million yuan, -24.40% year on year, reversing losses month on month; net profit of 55 million yuan after deducting non-return net profit of 55 million yuan, +3.45% year on year, reversing losses month on month. The company's 23H1 performance declined year-on-year, mainly due to factors such as inflation, geopolitics, and product de-inventories in Europe. Demand for the company's light power business was under pressure.
23Q2 gross margin increased month-on-month, and the cost ratio declined significantly month-on-month during the period. The overall gross profit margin of 2023H1 was 16.28%, -0.95pct year-on-year. Among them, the gross margin of 2023Q2 was 17.39%, -0.62 pct year on year and +2.89 pct on month, mainly due to the increase in the scale effect of Q2; the cost ratio for the period was 7.79%, -0.94 pct year on year, and -8.12 pct over the previous year. Among them: the sales expense ratio was 2.18%, year-on-year -0.20 pct, month-on-month, 0.57 pct, which remained relatively stable; the management expense rate was 2.87%, year-on-year -0.84 pct, month-on-month -2.25 pct. The month-on-month decline was mainly due to scale effects; the R&D expense rate was 4.05%, -0.12 pct, month-on-month -2.37 pct. The absolute amount of R&D expenses remained stable, and the month-on-month decrease was mainly due to the Q2 scale effect; the financial expense rate was -1.30%, +0.22pct, month-on-month- 2.93 pct, mainly due to exchange rate fluctuations.
The light power business is under pressure due to European demand, and the energy storage business is growing at an impressive rate. By business, 2023H1's light vehicle lithium-ion battery segment achieved sales revenue of 472 million yuan, or -34.85%, mainly due to European inflation and inventory removal, and demand for electric bicycles was under pressure; the energy storage battery sector achieved sales revenue of 440 million yuan, +253.72%, mainly due to strong demand in the South African household storage market, which led to a significant increase in the company's energy storage business; the consumer electronic battery sector achieved sales revenue of 294 million yuan, +16.76%, maintaining steady growth; the lithium-ion battery sector achieved sales revenue of 0.27 billion yuan , -61.42% year-on-year, mainly due to the relocation of Kaide's new energy plant and the impact of the rise in large cylindrical production capacity.
Electric motorcycles contribute new momentum to the light power business, and energy storage is expected to maintain rapid growth. The company's electric bicycle battery business is affected by European demand and is under pressure in the short term, but the company is further developing the electric two-wheeler battery market, including Southeast Asia, India and Africa, especially the electric motorcycle market. The main customers include Longlong Technology, Wuyang Honda, Maverick Electric, etc.; with the rise of overseas e-motorcycle markets such as Southeast Asia and India, as well as falling lithium prices and the application of sodium electricity, the company's e-motorcycle business is expected to further open up the domestic e-motorcycle market, and contribute new growth momentum to the lightweight power business. In the energy storage business, the company's household storage mainly faces the South African market, portable energy storage mainly faces the North American market. 23H1's total energy storage revenue is 450 million yuan. We expect household storage to account for more than 50% of this. Furthermore, the small and medium-sized industrial and commercial energy storage developed by the company also achieved small-batch shipments in 23H1. Driven by factors such as the implementation of subsidies, the gradual increase in electricity price differences between industrial and commercial peaks and valleys, and falling energy storage supply chain costs, it is expected that industrial and commercial energy storage demand is expected to gradually explode, and the company's industrial and commercial energy storage products are expected to be released.
Risk factors: demand in the light electric two-wheeler industry falls short of expectations; demand in the energy storage industry falls short of expectations; competition in the lithium battery industry increases risk; risk of rising raw material prices; risk of falling short of expectations in the company's customer development; risk of changes in technology routes.
Investment suggestions: Considering the impact of European inflation and inventory removal on the company's light power business, we adjusted the company's net profit forecast for 2023-2024 to 169/271 million yuan (the original forecast was 302/412 million yuan), the net profit forecast for 2025 was 397 million yuan, the corresponding EPS for 2023-2025 was 1.69/2.71/3.97 yuan, respectively, and the current price corresponding to 2023-2025 PE was 20/12/8 times, respectively.
The company is a leading domestic lightweight power lithium battery enterprise. Its business covers lithium-ion batteries for light vehicles, energy storage batteries, consumer batteries and lithium-ion batteries, accounting for more than 60% of export sales. In the short term, due to factors such as overseas inflation, European inventory removal, and raw material price fluctuations, etc., the company's light power business demand is under pressure, but by developing electric motorcycle markets in Southeast Asia, India and other places, the company is expected to contribute new growth momentum. In terms of energy storage, the company focuses on household and portable energy storage products, benefiting from the rapid growth in demand in emerging markets such as South Africa. At the same time, it is also actively expanding industrial and commercial energy storage to enrich the energy storage product line, and is expected to achieve volume growth driven by demand. Overall, we are optimistic that the company's future performance is expected to continue to be repaired, driven by the light power market such as electric motorcycles and energy storage demand. Referring to the valuation levels of comparable companies Sunwoda, Blue Lithium, and Tianneng shares (the average expected average value of Wind in 2023 is about 22xPE), the company was given a valuation of 22x PE in 2023, corresponding to a target market value of 3.8 billion yuan, corresponding target price of 38 yuan/share, and maintained a “buy” rating.