Description of the event
The company released its 2023 three-quarter report. The operating income for the first three quarters of 2023 was 13.186 billion yuan, +31.86% year-on-year, and net profit was 2,324 billion yuan, +39.54% year-on-year. Among them, 2023Q3 revenue was 6.101 billion yuan, +34.04% year on year, up 60.0% month on month; net profit was 1,123 billion yuan, +31.71% year on year, up 76.3% month on month.
Incident comments
Orders are continuously being accepted. Since this year, due to the low capacity utilization rate of downstream lithium battery manufacturers, the acceptance of orders for lithium battery equipment has generally been under pressure. The company's revenue growth rate in 2023Q1 was low. Since 2023Q2, revenue growth has been good year-on-month, and inspection has gradually resumed, and 23Q3 has increased month-on-month. In the first three quarters of 2023, the company's revenue grew by 31.86% and net profit grew by 39.54%. The profit growth rate continued to be higher than the revenue growth rate.
Profitability remains high. The company's gross profit margin for the first three quarters of 2023 was 38.03%, up 2.38pct year on year; net profit margin was 17.58%, up 0.93pct year on year; 23Q3 gross profit margin was 35.62%, down 1.69pct year on year, and net profit margin was 18.12%, maintaining a high level. The company has strict requirements for order quality, and as the self-control ratio increases and outsourcing decreases, gross margin is expected to remain stable at a high level, and net interest rates are expected to continue to rise under large-scale effects.
There are plenty of orders in hand. The company signed new orders of about 26 billion yuan without tax in '22. According to our estimates, the company's orders for the first half of the year are expected to decline year-on-year, but since this year, orders have increased quarterly. 23Q3 is already at the same level as last year. As of the end of 23Q3, the company's on-hand orders remained above 33 billion yuan (above excluding tax). With the gradual restoration of downstream production capacity utilization, it is expected that orders will be gradually accepted, and subsequent performance is worry-free. In addition, large-scale orders from the company that won ACC's bid in Q3 will be included in Q4.
It is expected that Q4 overseas orders will be implemented at an accelerated pace. However, demand from overseas lithium battery manufacturers is gradually being released. In the first three quarters of 2023, overseas, including Korean SK, LG, etc., China's overseas battery factory Envision AESC, European battery factory ACC, etc. all held large-scale tenders. In addition, other projects such as Southeast Asia, South Asia, North America, and Europe also formed an increase. The company has already received large orders, including Vision AESC and ACC, and has also achieved a breakthrough in LG. The share of overseas orders is expected to continue to increase in the future. It is expected that in Q4 there will also be tenders for projects such as Volkswagen, ACC, and Ningde Hungary. The company's overseas orders are expected to be implemented at an accelerated pace and on a large scale.
Diversification supports long-term growth. As a leading platform-based company, the company has laid out eight major divisions, including lithium batteries, photovoltaics, 3C, logistics, automobiles, lasers, fuel cells, and capacitors, and has developed comprehensively. Since this year, PV orders have grown rapidly, and other sectors such as 3C have developed steadily. The share of non-lithium battery business and overseas orders has increased over the past 23 years, and platform-based development and overseas expansion will give the company alpha. During the downturn in the industry, the company has increased its investment in active change and attracted more talents to join. We continue to be optimistic about the company's long-term growth.
Investment advice. It is estimated that the company's net profit for 2023-24 will be 35.6 billion yuan and 4.26 billion yuan respectively, and the corresponding PE will be 11.5 and 9.6 times, respectively, which is at the bottom of the historical valuation, maintaining the “buy” rating.
Risk warning
1. Downstream production expansion falls short of expected risks;
2. Management risks caused by scale expansion.