Yuanli Co., Ltd. disclosed its three-quarter report, and the performance was in line with expectations. 2023Q1-Q3 achieved revenue of 1.48 billion yuan, +2% year-on-year; net profit of 180 million yuan, +6% year-on-year; net profit after deduction of 170 million yuan, +4% year-on-year. Among them, Q3 achieved revenue of 520 million yuan, +3% month-on-month; net profit of 62.063 million yuan, -9% month-on-month; net profit after deduction of 607.04 million yuan, -11% month-on-month. This year, Q1-Q3, the company's comprehensive gross profit margin was 22.0%, y-0.4pct; net profit margin was 14.0%, +0.2pct year-on-year. The performance was in line with expectations.

In October, the Ministry of Industry and Information Technology once again announced sodium-electric models, and the industrialization process accelerated again. Since 2023, sodium-ion batteries have found breakthroughs in small power and energy storage fields such as two-wheelers and A00, and the industrialization process continues to advance. In June, the Ministry of Industry and Information Technology approved two models equipped with sodium-ion batteries for the first time in the 372nd batch of “Road Motor Vehicle Manufacturers and Products Notice”, from Chery and Jiangling Group, respectively. In October, the Ministry of Industry and Information Technology once again approved a sodium-battery model in the 376th batch of “Road Motor Vehicle Manufacturers and Products Notice” as a JAC A00 class pure electric sedan. The gradual maturity of sodium battery technology is driving huge demand for upstream materials, and the progress of mass production of anode materials may become one of the keys to advancing the industrialization of sodium electricity.

The layout of hard carbon+silicon carbon anodes is leading, and production capacity construction is progressing in an orderly manner. In December 2022, the company announced that it plans to invest 500 million yuan to establish Yuanli New Energy Carbon Materials (Nanping) Co., Ltd., a wholly-owned subsidiary, to lay out the field of new energy carbon materials. In 2023, the company added a “new energy hard carbon production project with an annual output of 50,000 tons” for sodium-ion batteries. The project was built in five phases, of which the first phase is planned to produce 1,500 tons per year. Currently, the company's hard carbon anode products are in the pilot phase, and the first production line is expected to be put into operation within this year. In addition, the company also has a corresponding layout for silicon carbon anodes. At the end of October, the company announced that actual controller Lu Yuanjian plans to increase his shares by no less than 15 million yuan over the next 6 months, demonstrating confidence in the company's long-term development. As sodium batteries gradually enter the stage of commercial implementation and mass production and delivery in small power markets such as two-wheelers and A00, the high specific capacity advantages of silicon carbon anodes have gradually become prominent, and it is optimistic that the company will gain more growth in the market with its leading technical advantage+production capacity layout.

Profit forecast: The company's net profit from 2023-2025 is expected to be 2.6/33/ 500 million yuan respectively, up 14.4%/29.0%/49.9% year on year. The corresponding 2023-2025 PE is 21.7x/16.8x/11.2x, respectively. Maintain a “buy” rating.

Risk warning: downstream demand falls short of expectations; industry competition intensifies; new product development falls short of expectations, etc.