Event: The company recently released its report for the third quarter of 2023.
Comment:
2023Q3 performance increased beyond expectations, and profitability increased month-on-month. The company is a leading enterprise in the lithium battery separator industry. Its main customers include well-known lithium battery manufacturers at home and abroad, such as Ningde Era, BYD, China Innovation Airlines, Everweft Lithium Energy, Guoxuan Hi-Tech, Sunwoda, LG New Energy, and Samsung SDI. The first three quarters of 2023 achieved revenue of 2,211 billion yuan, a year-on-year increase of 5.64%; net profit of 668 million yuan, an increase of 13.56%; net profit after deduction of 574 million yuan, an increase of 0.26% year-on-year. The gross profit margin was 46.64%, up 1.62 pct from the previous year. The net profit margin was 31.06%, up 1.74pct year on year. Among them, 2023Q3 achieved revenue of 854 million yuan, a year-on-year increase of 12.61%, an increase of 23.43% over the previous year; net profit of 289 million yuan, an increase of 31.23% over the previous year, an increase of 47.12% over the previous year; net profit after deduction of 271 million yuan, an increase of 28.34% over the previous year, an increase of 89.79% over the previous year. The Q3 gross profit margin was 47.90%, up 6.83 pct year on year and 2.47 pct month on month. The net profit margin was 35.23%, up 4.76 pct year on year and 6.6 pct month on month. Against the backdrop of increased competition in the industry, the company's Q3 performance increased beyond expectations.
Continuously increase investment in research and development, and technological innovation leads development. The company's wet diaphragm equipment has been iterated to the fifth generation super wet line, with a single line production capacity of 250 million square meters, an increase of more than 2 times compared to the fourth generation wet line; the dry diaphragm production line has been iterated to the sixth generation production line. The original wet and dry line production capacity has been greatly increased, effectively reducing unit product costs. The company continued to increase R&D investment in new technologies and products. The R&D expenses for the first three quarters were 176 million yuan, an increase of 47.90% over the previous year, and the R&D expenditure rate reached 7.96%, an increase of 2.28 pct over the previous year. In 2021, the company developed cross-linked diaphragms with a film breaking temperature greater than 240℃, and also developed solid electrolyte composite diaphragms to enhance safety protection and cultivate new profit growth points for the company.
Actively promote global production capacity layout and enhance localized support capabilities. The company continues to promote global production capacity development, improve the layout of domestic and foreign production bases and increase production capacity, build new production bases in Nantong, Foshan, Europe, Sweden, Malaysia, etc., enhance its ability to provide localized support to downstream customers, and strengthen the development and market share of the company's domestic and foreign customers. Among them, the first phase of the Malaysian project is expected to be completed with an annual output of 2 billion square meters of wet diaphragms and supporting coated diaphragms after delivery.
Investment advice: Give an increase in holdings rating. The company's 2023-2025 EPS is expected to be 0.75 yuan, 1.00 yuan, and 1.25 yuan respectively, and the corresponding PE will be 21 times, 15 times, and 12 times, respectively, giving it an increase in holdings rating.
Risk warning: risk of downstream demand falling short of expectations; risk of falling product prices and falling gross margin; risk of increased market competition; risk of new product and technology iteration; risk of large fluctuations in raw material prices.