Event: The company released the 2023 quarterly report. In the first three quarters, the operating income was 1.33 billion yuan,-17.6% year-on-year; the corresponding single Q3 realized operating income of 330 million yuan,-50.1% year-on-year and-23.7% month-on-month. In the first three quarters, the net profit attributable to parent was RMB 90 million yuan,-24.5% year-on-year; the net profit attributable to parent was RMB 20 million yuan corresponding to single Q3,-33.3% year-on-year and +33.3% month-on-month. In the first three quarters, the net profit deducted from non-parent was RMB 80 million yuan,-27.6% year-on-year; the corresponding net profit deducted from non-parent in Q3 was RMB 20 million yuan,-25.8% year-on-year and +28.6% month-on-month.
Volume: man-made graphite shipments declined, LG end demand is relatively stable. The Company's single Q3 operating income decreased significantly month-on-month, which is expected to be caused by the decrease in shipments to domestic low-margin customers. It is estimated that the company's shipments in the first three quarters were 1.8/1.6/13,000 tons respectively, which declined quarter by quarter during the year, mainly due to the decline in man-made graphite shipments. At the same time, the bargaining power of large-scale battery factories has been enhanced, and some customers have obviously lowered the price of the negative varieties mainly shipped by the company. At present, the profit of low-end artificial graphite products may be close to the cost line. According to statistics of Baichuan Yingfu, the output of 23Q3 anode materials is about 260,000 tons, and the operating rate of the industry is only 50~60%; the market share of the corresponding company is about 5%, which is lower than that in the first half of the year. It is estimated that 23Q4 natural graphite products will be shipped and artificial graphite products will be connected to high-quality orders, achieving shipments of 16,000 tons +, corresponding to annual shipments of about 64,000 tons.
Profit: High gross profit margin maintained, natural graphite shipments contributed the main revenue. In the first three quarters, the gross profit margin of sales of the Company was 21.6%, 1.8pp higher than that of 2022; the gross profit margin of single Q3 was 22.0%, reaching a new high since 2022. Single Q3 net interest rate reached 6.0%, compared with 23Q2 month-on-month increase of 2.7pp, profitability significantly repaired.
According to Baichuan Yingfu statistics, the price of negative electrode materials dropped from 53,000 yuan/ton to 39,000 yuan/ton within the year. After excluding the graphitization price drop at the cost end, the price drop of negative electrode materials still reflects significant downstream price reduction phenomenon; the gross profit rate of the industry dropped from 18% at the beginning of the year to 17%, and the profitability generally declined within the year. According to the calculation, the profitability of natural graphite products of the company is stable, about 10%; artificial graphite products maintain break-even. It is expected that in the short to medium term, the company's natural graphite products (overseas customers) will contribute the main profits, and the profitability of artificial graphite products is expected to pick up with the optimization of customer structure and product upgrading. The net interest rate is expected to remain at 6% in 23Q4.
Convertible bonds were successfully issued, 800 million yuan of cash flowed in, and the company's anti-risk ability was enhanced. In October, Xiangfeng Convertible Bonds (123225.SZ) was listed with an issuance scale of 800 million yuan, mainly used for 60,000 tons of integrated production capacity construction (525 million yuan), R & D center construction (500 million yuan) and supplementary working capital (225 million yuan). As of 23Q3, the company's monetary capital reached RMB 330 million yuan, and the current ratio and quick ratio were lower than the industry average level. With the issuance of convertible bonds, the company's cash flow and solvency are expected to improve.
Earnings forecasts and investment advice. It is estimated that EPS from 2023 to 2025 will be 1.06 yuan, 1.32 yuan and 1.75 yuan respectively, and the corresponding dynamic PE will be 35 times, 28 times and 21 times respectively. The Company continued to promote production capacity construction, actively explored downstream customers, and had abundant technological reserves of new materials such as silicon-based negative electrode, soft and hard carbon, graphene, etc., which was optimistic about the Company's future development potential. Give 26 times PE in 2025, corresponding to the target price of 45.50 yuan, maintain the "buy" rating.
Risk warning: risk of sharp economic downturn, risk of product price decline, risk of product upgrading and replacement of emerging technology routes, risk of price fluctuation of raw materials and key energy power, risk of environmental protection and energy consumption, risk of overcapacity.