Core viewpoints
1. The company achieved a net profit of 66 million yuan in the first half of 2023, down 12.26% from the same period last year. 2023Q2's net profit in a single quarter was 39 million yuan, down 19.85% from the same period last year, and an increase of 47.96% over the previous year. The slight decline in gross margin of the copper strip and copper foil business unit put pressure on the company's performance.
2. Under the domestic macroeconomic pressure in the first half of the year, the gross profit of the company's copper strip and copper foil business units remains relatively stable, which fully reflects the continuous optimization of the company's product structure and customer structure.
3. The growing demand for copper for transformers supports the company's copper plate and strip business to maintain a high boom. After the Yongjie copper project is put into production, the company's high-precision copper strip production capacity will "please climb another high-rise building".
4. The order volume of pallet products is further full, and the market share is expected to increase.
Event
The company issues its 2023 half-yearly report
In the first half of 2023, the company realized operating income of 3.507 billion yuan, down 4.62% from the same period last year; realized net profit of 66 million yuan, down 12.26% from the same period last year; and realized net profit of 58 million yuan, down 18.43% from the same period last year. 2023Q2 single-quarter net profit reached 39 million yuan, down 19.85% from the same period last year, an increase of 47.96%.
Brief comment
The decline in gross profit of copper strip and copper foil business units led to the pressure on the company's performance: in the first half of 2023, the company's copper strip production / sales volume was 54000 tons / 53700 tons respectively, a year-on-year change of 0.3% Mac 0.8%; copper foil production / sales were 1841 tons / 1851 tons respectively, a year-on-year change of 65.5% / 57.9%; car battery tray production / sales were 10900 sets / 13500 pieces respectively Benefits: in the first half of 2023, the price / cost per ton / gross profit per ton of copper strip business of the company was 62300 yuan / 59800 yuan / 2500 yuan respectively, down 5.7% / 5.7% compared with the same period last year; the price / cost / gross profit per ton of copper foil business was 66600 yuan / 63800 yuan / 2800 yuan respectively, down 6.0% 4.6% from the same period last year. Under the domestic macroeconomic pressure in the first half of the year, the gross margin of the company's copper strip and copper foil business units remained relatively stable, fully reflecting the continuous optimization of the company's product structure and customer structure.
Transformer copper demand growth to support the company's copper plate and strip business to maintain a high boom. The company's copper plate and strip products are widely used in transformers, power cables, communication cables, radiators, heat exchangers, electronics and electrical appliances, new energy and other fields. In recent years, with the rapid development of China's power industry and the steady growth of electricity consumption in the whole society, the demand for transformers in China has increased steadily. According to the data of Huajing Industrial Research Institute, with the landing of UHV projects in various parts of China, the national transformer output is expected to reach 194845 KVA in 2022, an increase of 5.1% over the same period last year. The market size of China's transformer industry is expected to grow from 4.9 billion yuan in 2022 to 7.5 billion yuan in 2025, with an average annual compound growth rate of 15%. The main raw materials related to the transformer are oriented silicon steel, electromagnetic wire, insulating cardboard, etc., of which the cost of copper material accounts for about 30%. We expect that the sales volume of transformers in the company's copper plate and strip business accounts for about 1x3; the company's transformer copper products have sold well all over the country for many years and enjoy a high reputation in the Pearl River Delta, Yangtze River Delta, Yellow Sea and Bohai Sea and southwest regions. the main customers include Nanrui Group, Xuji Group, Siemens, Hengtong Group, etc. the growth of copper demand for transformers supports the company's copper plate and strip business to maintain a high boom.
After the Yongjie copper project is put into production, the company's high-precision copper strip production capacity will "please climb another high-rise building". The company has an annual production capacity of 100000 tons of copper strip and foil, which has reached full production and sales at present. In March 2022, its subsidiary Yongjie Copper Industry built a project with an annual output of 100000 tons of high-precision copper alloy strip and 50, 000 tons of copper strip billet in Nanling County, Anhui Province. the first phase of the implementation project is the annual production line of 50, 000 tons of high-precision copper alloy strip and 50, 000 tons of copper strip billet, which is expected to be completed and put into production in 2024 After the project is put into production, the production capacity of the company's high-precision copper alloy strip will be effectively expanded, the production, sales and proportion of high value-added products will be further improved, and the company's competitiveness and market share are expected to "please climb another high-rise building".
Power battery metal structure business: the order volume of pallet products is further full, and the market share is expected to increase the company's existing battery pallet production capacity of 300000 pieces. In July 2022, the company plans to expand the production capacity of metal structure components of power batteries, expanding the annual production capacity of new energy vehicle battery packs and energy storage battery packs to 500000; as of the 2022 annual report, the company has an annual production capacity of 300000 battery pallets. At present, the production capacity is climbing and actively opening up the market, and the expansion of the remaining 200000 units is under way. In 2022, the production / sales volume was 388,307 pieces, and the 2023H1 production / sales volume was 1.09 million units.
With the fixed point of the project, the order volume of pallet products is further full, and the market share is expected to increase. The main customers of the company's pallet products include Chery, Hezhong and other automobile companies. On February 23, 2023, the company received a project notification email. Zhongyuan New Energy, a subsidiary of Zhongyuan New Energy, has become a supplier of new energy battery shell assemblies and accessories for a certain model in Wuhu Qida Power Battery system Co., Ltd., and the project is expected to be mass produced and supplied in the second half of the year. In 2023, the company will continue to expand production capacity under the guidance of market demand and customer demand, and at the same time actively open up new customers. It is expected that with the establishment of a long-term and stable cooperative relationship between the company and customers and the continuous improvement of product production efficiency and quality, the market share of the company's pallet products is expected to continue to increase.
Investment suggestion: the company's net profit from 2023 to 2025 is expected to be 151 million yuan, 215 million yuan and 326 million yuan respectively, and the PE corresponding to the previous share price is 19.2,13.5,8.9 times respectively. Considering the company's status and growth in copper belt and foil, battery tray, battery aluminum foil and anti-corrosion & thermal insulation materials, energy storage industry status and growth, the company is given a "buy" rating.
Risk analysis.
1. The processing fee of copper strip and foil is reduced. If the economic growth rate goes down, the processing fee for copper strip and foil may decrease. We assume that the company's gross profit per ton of copper strip is 2500 yuan in 2023. According to estimates, if the processing fee for copper strip falls by 5% and 10%, the company's net profit will drop by 3.7% and 7.3% in 2023.
2. The sales volume of the battery tray business is lower than expected. The sales amount of the company's battery tray business is directly related to downstream customer car production and other factors, which may occur due to customer business adjustment or major changes in the external macro environment, unexpected events, and risks caused by other force majeure factors.
3. The competition in the battery aluminum foil industry is intensified. In recent years, due to the expansion scale and speed of battery aluminum foil can not match the expansion scale and speed of power battery, the overall supply and demand of battery aluminum foil industry is tight, and the price remains high, but with the release of new battery aluminum foil production capacity, the industry is likely to have overcapacity, when the industry competition will be further intensified.
4. the sales of anticorrosive and thermal insulation materials are not as expected; the order of energy storage project is not as expected; the progress of the project is not as expected; the price of raw materials is rising.
5. Guarantee risk. As of September 1, 2023, the company and its holding subsidiaries actually guaranteed a total of 1.3976284 billion yuan, accounting for 121.28% of the company's latest audited net assets (excluding minority shareholders' interests). The total amount of guarantees provided by the company to the controlling subsidiaries is 1.2776284 billion yuan, accounting for 110.87% of the company's most recent audited net assets (excluding minority shareholders' interests).