In 2023Q3, the company achieved net profit of 69 million yuan, -57.93% year-on-year and +561.12% month-on-month, and achieved net profit of 84 million yuan, -53.59% year-on-year and +260.16% month-on-month. The main reason is that Q3's inventory structure was further optimized, the inventory structure was further optimized, profit margin recovery was obvious, and profitability increased dramatically. In the long run, the company actively promotes overseas market layout and strives to increase the share of overseas sales and market share of the anode materials business; the company continues to promote the construction of an “integrated anode material project”, which is expected to maintain the self-sufficiency rate of graphitization above 70%. At the same time, the company made a share repurchase decision, demonstrating the company's confidence in its own development. We are optimistic about the company's long-term competitiveness and maintain a “buy” rating.
Matters: On October 26, 2023, the company released its three-quarter report for 2023, achieving revenue of 3,522 billion yuan, -5.95% year-on-year, net profit of -56 million yuan, and -113.20% year-on-year. Our comments on this are as follows:
2023Q3 achieved net profit of 84 million yuan after deducting non-return of net profit, +561.12% over the previous month, a significant improvement over the previous month.
2023Q3 achieved revenue of 1,288 billion yuan, -24.79% year-on-year, +7.92% month-on-month, and realized net profit of 69 million yuan, -57.93% year-on-year, +561.12% month-on-month, and realized net profit of 84 million yuan, -53.59% year-on-year, and +260.16% over the previous month. With further reduction in the company's inventory volume and continuous optimization of inventory structure, the company's Q3 profitability improved markedly.
The improvement in gross margin is obvious, and the cost ratio is well controlled. The company's overall gross margin for the first three quarters of 2023 was 12.85%, -8.28pcts, and the 2023Q3 gross margin was 16.74%, -1.68pcts year-on-year, +3.74pcts month-on-month. The recovery in Q3 gross margin was obvious. The 2023Q3 company's cost rate for the period was 12.03%, +3.77pcts year on year and -0.77pcts month on month. Among them, the sales/management/development/financial expense ratio was 1.47%/2.97%/4.79%/2.81%, respectively, +0.64/+1.15/+1.26/+0.72pcts, respectively, and +0.13/+0.03/-0.30pct month-on-month, and overall expenses were relatively stable.
Actively expanding overseas markets, the self-sufficiency rate of graphitization continues to increase. In recent years, the company has actively deployed overseas markets, striving to increase the market share of the company's global anode materials business, and expansion efforts have achieved certain results. We expect that the share of overseas sales of the company's lithium battery anode business will increase markedly in 2023. Furthermore, the company's Gui'an New Area base project has been basically completed and gradually expanded, and the Yunnan Qujing base project is expected to be completed and gradually put into operation within the year. As the company continues to advance the construction of an “integrated anode material project,” the company's graphitization self-sufficiency rate is expected to remain above 70% in the future.
The company made a “share repurchase” resolution, demonstrating confidence in the company's future development. On September 28, 2023, the company meeting deliberated and passed the “Resolution on the Plan to Repurchase Company Shares through Centralized Bidding Transactions”. It is proposed to use own capital for centralized bidding at a price of no more than 16 yuan/share. It is estimated that 6.25 million to 12.5 million shares of the company will be repurchased, with a total repurchase capital of about 1-2 billion yuan. The repurchased company shares will be used for employee stock ownership plans or equity incentives. The repurchase decision shows the company's full confidence in future performance. Employee stock ownership plans or equity incentives are expected to fully motivate the company's employees, improve the company's management efficiency, and drive the company's future performance to increase.
Risk factors: The progress of the company's fund-raising projects and production capacity construction fell short of expectations; sales of new energy vehicles fell short of expectations; technological route changes; competition in the anode industry exceeded expectations; geopolitical risks.
Investment suggestions: In the long run, the company's production capacity continues to expand, costs continue to be reduced on the process and raw materials side, accumulates high-quality customers such as Ningde Era, BYD, and SKI, and continues to increase its core competitiveness. As industry demand explodes rapidly, we expect the company to experience rapid growth. Considering the increasing competitive pattern in the industry, we gave a net profit forecast of 0.42/4.21/716 million yuan for 2023-2025 (the original forecast for 2023-2024 was 11.08/1,585 billion yuan), and the corresponding EPS forecasts were 0.06/0.58/0.99 yuan (the original forecast was 1.53/2.19 yuan). In terms of valuation, referring to the valuation of comparable companies in the negative electrode industry, Putai is the comparable company. The corresponding 2024 valuation is 12xPE (Wind unanimous expectations). At the same time, considering that the company's business growth rate is ahead of its peers, we gave the company 20x PE in 2024, corresponding to the target price of 12 yuan/share, maintaining the “buy” rating.