2023Q3 achieved revenue of 13.51 billion yuan, +5.4% yoy, +25.0%; net profit of 620 million yuan, -7.9% yoy, +30.4%; net profit of 4.6 billion yuan, minus non-net profit of 4.6 billion yuan, -20.7% yoy, +22.8% month-on-month.

In the third quarter of 2023, the company's growth rate slowed due to a slowdown in lead-acid demand and high technology during the same period. Looking ahead, we expect our main business, the lead-acid business, to maintain a moderate growth rate, the pace of lead-carbon storage energy release is expected to accelerate, and lithium battery energy storage still needs to be built and the supply and demand pattern of the industry is further optimized.

There was a brief slowdown in growth. The first three quarters achieved revenue of 35.06 billion yuan, +16.7% year-on-year; net profit of 1.71 billion yuan, +20.1% year-on-year; net profit after deduction of 1.37 billion yuan, +26.0% year-on-year. Among them, 2023Q3 achieved revenue of 13.51 billion yuan, +5.4% year-on-month, +25.0%; net profit of 620 million yuan, -7.9%, +30.4% month-on-month; and net profit of 4.6 billion yuan, -20.7% yoy, +22.8% month-on-month. The company's overall operations were steady in the first three quarters of 2023, and the quarterly growth rate slowed in the third quarter, mainly due to the slowdown in lead-acid demand and the high base for the same period.

The slowdown in demand for two-wheelers dragged down growth in the third quarter. The company is the world leader in lead-acid batteries for two-wheelers. The downstream two-wheeler market was very prosperous in the first half of 2023. The company's lead-acid battery revenue was +36.3% year-on-year. Demand for two-wheelers has slowed since the third quarter, leading to a month-on-month slowdown in the growth rate of the company's main lead-acid business, which has dragged down the company's overall revenue growth rate. In addition, in addition to lead-acid power batteries, the company focuses on new technology fields such as lithium battery energy storage, lead-carbon energy storage, and sodium electricity. Among them, the year-on-year growth rate of lead-carbon since this year has exceeded 200%, showing a trend in emissions. In particular, this year's market competition for lithium battery energy storage has intensified and exceeded expectations. Combined with the slowdown in demand growth in some markets, this sector contributed less this year.

In terms of sodium electricity, the company has released the first-generation sodium battery Tiannao T1 product and is awaiting market expansion.

Increase the launch of new products, and increase the company's marketing and R&D expenses. The company's overall gross profit margin for the first three quarters was 17.9%, +0.4pct year-on-year, of which the gross margin for the third quarter was 16.2%, -1.9pcts year-on-year and -2.6pcts month-on-month. The company's sales/management/R&D/financial expenses in the first three quarters were 2.7%/2.5%/3.6%/-0.3%, respectively, compared to -0.1/-0.2/+0/-0.4 pct. The overall change was not significant. In the first three quarters, the company achieved a net profit margin of 4.9%, a year-on-year ratio of +0.1 pct, and a single-quarter net interest rate of 4.6% in the third quarter, -0.7 pct year-on-year, and +0.2 pct over the previous quarter.

Risk factors: Lead-acid battery market demand falls short of expectations; upstream energy storage costs such as lithium carbonate continue to rise, leading to lower energy storage costs than expected, leading to lower energy storage economy than expected; the company's lithium battery production capacity is lower than expected, making target production capacity difficult to achieve; the company's core technology and talent are lost, and R&D patents are at risk of leaking; the company's hydrogen fuel cells are still in the R&D testing stage, and the commercialization rate may be lower than expected.

Profit forecast, valuation and rating: The company's lead-acid and lithium battery two-wheel drive, the lead-acid business is progressing steadily, and the lithium battery business continues to accumulate. Considering the slight decline in profitability in the third quarter, we adjusted the company's net profit forecast for 2023-2025 to 2.23 billion/2.64 billion/3.03 billion yuan (the original forecast was 2,434 billion/3,064 billion/3.06 billion yuan), and the corresponding EPS forecast is 2.29/2.72/3.12 yuan (the original forecast was 2.50/3/15/3.71 yuan), and the current price corresponds to 14/12/ 10 times PE. The company's lead-acid business has solidified and rebounded, and new businesses such as lithium battery energy storage are expected to usher in a second increase in production capacity.