Matters:
The company announced its three-quarter report for 2023. As of 2023Q3, the company had achieved revenue of 3,522 billion yuan, -5.95% of the same period; net profit of 56 million yuan, -113.20% of the previous year; and realized net profit after deducting non-return net profit of 27 million yuan, -105.90% year-on-year. Gross sales margin was 12.85%, and net sales margin was -2.63%.
In 2023Q3, the company achieved revenue of 1,288 million yuan in a single quarter, -24.79%; net profit of the mother's net profit of 69 million yuan, -57.93% of the same period; and net profit deducted from non-return mother of 84 million yuan, or -53.39% year-on-year. Gross sales margin was 16.74%, +3.73 pcts month-on-month; net sales margin was 4.40%, +4.87 pcts month-on-month.
Commentary:
Various operating indicators continued to improve in the third quarter, and profit Q3 continued to rise in Q2. As of Q3, the company's net profit was -56 million yuan, compared with the semi-annual report of -125 million yuan, and the loss narrowed; the gross profit margin and net profit margin on sales improved quarter by quarter. In 2023, the company's gross sales margin for Q1/Q2/Q3 was 7.85%/13.01%/16.74%, respectively, and the net sales margin was -13.79%/-0.47%/4.40%, respectively. The Q3 net sales margin had turned a loss into a profit. As the company's inventory volume is further reduced, the inventory structure continues to be optimized. The book value of inventory fell from $2,953 billion at the beginning of the year to $2.115 billion at the end of the reporting period, a decrease of 28.37%, and the inventory structure became more reasonable.
The production capacity of anode products is progressing steadily, and overseas expansion is accelerating. On the negative side, the first phase of the Gui'an New Area base project is in the capacity release stage. The Yunnan Qujing base project is being actively promoted. Relevant production lines have been completed and put into operation one after another. The company's other new production capacity construction projects are progressing steadily according to the plan in line with customer needs. With the progress of the company's new production capacity construction projects, the self-sufficiency rate of graphitization has reached more than 70%. In terms of energy storage, anode products have been supplied in batches, and fast charging anode products have been successfully applied in batches by clients. Overseas, at present, South Korea's SK On and LGES have achieved batch supply, and the development of other overseas customers is progressing according to plan.
The share repurchase shows confidence in the company's performance. On September 28, 2023, the company issued the “Notice on the Plan to Repurchase Company Shares through Centralized Auction Trading”, which intends to use its own capital to centrally bid at a price of no more than 16 yuan/share. The total repurchase capital is 1-2 billion yuan. It is estimated that 6.25 million to 12.5 million shares will be repurchased, accounting for about 0.86%-1.73% of the company's current total share capital. The company shares purchased back will be used for employee stock ownership plans or equity incentives.
Investment advice: The company lost money in the first half of the year due to short-term fluctuations in raw materials. However, Q2 has turned a loss into a profit, and Q3 profits have continued to grow. As the company's inventory structure is adjusted, production capacity expands, and overseas markets expand, the company's profit level is expected to recover. We forecast that the company's net profit from 2023-2025 will be 0.05/4.84/648 million yuan respectively, maintaining the “strong promotion” rating.
Risk warning: downstream demand falls short of expectations; capacity expansion falls short of expectations; the extent of graphitization support falls short of expectations; risk of worsening supply and demand in the negative electrode industry, etc.