Main points of investment

Affected by the reduction in demand for power batteries, the company's performance in the first three quarters of 2023 was under pressure: the company's revenue in the first three quarters of 2023 was 1.13 billion yuan,-12% compared with the same period last year, of which the net profit was 100 million yuan, and the revenue of Q3 was 430 million yuan,-31% compared with the same period last year. + 4%, homed net profit was 40 million yuan,-63% year-on-year, + 58%.

Profitability declined slightly, optimistic about the scale effect of subsequent battery shell release: in the first three quarters of 2023, the company's sales gross profit margin was 27.9%, year-on-year-3.7pct, net sales profit rate was 7.6%, year-on-year-6.6pct, period expense rate was 18.8%, year-on-year + 6.6pct, of which sales expense rate was 1.9%, year-on-year + 0.2pct, management expense rate (including R & D) was 14.3%, year-on-year + 3.9pct Financial expense rate is 2.6%, year-on-year + 2.5pct Q3 single-quarter sales gross profit margin of about 25.3%, year-on-year-6.4pct, month-on-month + 0.7pct, sales net profit rate of about 7.6%, year-on-year-9.6pct, month-on-month + 2.3pct. Following the rebalance of supply and demand in the lithium power industry, the profitability is expected to stabilize and pick up.

Contract liabilities declined slightly, and net cash flow from operating activities improved year-on-year: as of the end of 2023Q3, the company's inventory was 1.01 billion yuan, year-on-year + 25%, and contract debt was 120 million yuan,-16% year-on-year. The net cash flow of operating activities in the first three quarters of 2023 was-3 million yuan, compared with-180 million yuan in the first three quarters of 2022.

Cans / lid equipment leader, new energy battery shell brings new growth points: the company's traditional main business is cans / cover equipment, and its revenue accounted for more than 80% in 2018-2022. In 2022, the cumulative market share of the company's high-speed production equipment in Europe and the United States has exceeded 70%. The cumulative market share in Europe and the United States has been close to 10%. In 2018, the company made use of the experience of cans to produce power battery structures. At present, square battery cases, small cylindrical steel shells and cylindrical aluminum shells have been supplied in batches. 2023H1 battery shell business accounts for 40% of the small batch trial production of large cylindrical steel shells.

Profit forecast and investment rating: taking into account the volume progress of the battery shell business, we expect the company's 2023-2025 net profit to be 1.6yuan (1.8yuan, down 11%) / 31cm, corresponding to the PE of 38-20-13, maintaining the "overweight" rating.

Risk hint: the permeability of new energy vehicles is lower than expected, and the discharge of large cylindrical batteries and square shell batteries is not as expected.