Description of the event

The company released its three-quarter report for 2023. Q3 achieved operating income of 1,288 million yuan, a year-on-year decrease of 24.79%, attributable net profit of 69 million yuan, a year-on-year decrease of 57.93%, a year-on-year increase of 561.12%, and a net deduction of 84 million yuan in non-net profit, a year-on-year decrease of 53.59%, and an increase of 260.16% over the previous year.

Incident comments

Looking at the third quarter alone, the company achieved a further increase in shipment volume and achieved relatively rapid month-on-month growth, mainly due to the recovery in demand from downstream customers. Among them, the share of fast charging products is expected to remain above 50%. In terms of profit, the company's Q3 anode product sales price estimates declined month-on-month, mainly affected by industry price competition; from the financial side, it is speculated that the gross profit per ton showed a recovery trend. On the one hand, it is due to the reduction in the company's comprehensive cost of graphitization. After the removal of high-priced graphitization inventories in 2023H1, the Q3 company's graphite outsourcing price was close to the market price, while the self-supply ratio increased to 70% +, and the contribution cost was reduced. On the other hand, the increase in capacity utilization also reduced the cost per ton; the estimated net profit per ton improved markedly from month to month.

Looking ahead to Q4, the price competition in the anode industry has come to a phased end, Q4 product prices are expected to be stable month-on-month. Cost-side Q3 high-priced graphitized inventories have little impact. The company's Ningde joint venture integrated production capacity continues to rise, the graphite self-supply ratio continues to rise, inventory costs at the end of Q3 are low, and the possibility of subsequent impairment is low, supporting a steady increase in Q4 single-ton profit over month. On the customer side, the company's domestic and foreign customer structure remained stable, and the recovery in demand led to a continuous increase in Q4 sales volume from month to month. In terms of fast charging products, the company's fast charging accounts for 50+%, and carbonized products for major domestic customers account for 70+%. The company's leading layout in fast charging is expected to bring elasticity to performance with the release of downstream fast charging models.

Looking ahead to next year, the company is expected to achieve net profit of 400 million yuan, corresponding valuation 19 times. Maintain a “buy” rating.

Risk warning

1. Market competition increases risk;

2. The risk that demand in the power battery industry falls short of expectations.