Main points of investment

The net profit of Q3 company in 2023 was 120 million yuan, down 40% from the previous month, slightly lower than market expectations. In the first three quarters of 23, the company's revenue was 14.2 billion yuan, down 14%, and the net profit was 470 million yuan and 55%, of which Q3 company's revenue was 5 billion yuan, 3%, 7%, 120 million yuan, 73%, 40%, 110 million yuan, 77%, 31%. Q3 gross profit margin 9.6%, with minus 8.9pct, ring minus 3.0pct, homing net interest rate 2.4%, same minus 6.1pct, ring minus 1.8pct, slightly lower than market expectations.

The shipping ring of 23Q3 battery foil increased by 20%, the profit per ton decreased slightly, and the processing fee remained stable.

In the first three quarters, the company shipped about 94000 tons of battery foil, an increase of 25%. Among them, 23Q3 expects to ship about 38000 tons, an increase of 20%. The company's production schedule is stable in October-November. We expect Q4 shipments to increase slightly from the previous month to 13-140000 tons in 23 years, an increase of 20-30%. In terms of profit, we estimate that the non-profit per ton of Q3 is about 3500 yuan, down 10% from the previous month. The battery foil processing fee Q3 remains stable, and the dilution of the company's expenses affects the unit profit level. The profit per ton of Q4 is expected to be flat compared with the previous month. The profit per ton for the whole year is expected to be about 4000 yuan.

Packaging foil overseas manufacturers and tables lead to losses, air-conditioning foil + strip break even. In the first three quarters, single and double zero foil shipments were about 160000 tons, a decrease of about 35%, of which Q3 shipped about 50,000 tons, which was the same as the previous quarter. Q3 acquired a 100% equity stake in Slim Aluminum and completed the table. It currently has a production capacity of 120000 tons in Italy + 15000 tons in Germany. However, due to the weak demand for overseas food packaging foil and the high production costs in overseas factories, Q3 overseas factories led to a loss of 0.4-50 million yuan. Food packaging foil a total loss of about 20 million yuan, overseas bases can be converted to battery foil production capacity, is expected to gradually turn losses into profits in 24-25 years. Air conditioning foil Q3 off-season, shipments of about 60,000 tons, basically maintain the break-even.

Q3 inventory level increased, operating cash flow significantly decreased. In the first three quarters of 23, the expense rate was 7.2%, with the same increase of 0.3pct, including 320 million yuan for the Q3 period, 8% for the same period, 9% for the ring, 6.4% for the expense rate, compared with the same month-0.4/1.1pct, the sales expense rate decreased by 0.8pct, and the R & D expense rate decreased by 0.6 pct for Q3 final inventory 3.7 billion yuan, an increase of 7% over the beginning of the year and 17% over the end of Q2. Q3 net cash flow from operating activities-320 million yuan, down 131% from the previous month.

Profit forecast and investment rating: due to the weak demand for overseas packaging foil, we revised the company's net profit from 2023-2025 to 6.1 billion yuan (originally expected to be 10.7 billion yuan), compared with the same period last year. The corresponding PE is 21x/17x/13x, considering that the company is the leader of battery aluminum foil, and the speed of production expansion is ahead of peers. We will give 2024 22xPE with a target price of 18.7 yuan. Maintain a "buy" rating.

Risk tips: raw material prices continue to rise, battery foil production expansion is not as expected, competition intensifies.