Matters:
Recently, the company announced the signing of a global strategic cooperation memorandum with LGES. LGES approved companies are suppliers of the highest quality in the market, and priority is given to purchasing the company's diaphragm products in overseas markets. The Memorandum of Cooperation stipulates that between 2024 and 2030, the two sides will jointly establish a global cooperation framework for the procurement volume of not less than 12 billion square meters of diaphragms.
Guoxin Telecom's new opinion:
1) The company won 12 billion square meters of diaphragm orders from 2024-2030 to help increase the proportion of overseas customers. We expect that the 12 billion square meter procurement framework reached between the company and LGES will mainly focus on wet diaphragm products, corresponding to the demand for about 700 GWh of lithium batteries, and an average annual supply of 1.7 billion square meters of diaphragm products over a seven-year period of cooperation. We estimate that the current proportion of overseas customers of Xingyuan Materials is about 40%, of which LGES accounts for 25%-30%. We expect that under the new cooperation framework in the future, the proportion of the company's overseas customers will be effectively increased, and in the future, LGES diaphragm procurement share will account for 30%-40% of the company's diaphragm shipments.
2) Benefiting from the increase in global battery demand, the company's diaphragm business is growing steadily. We expect global lithium battery shipments to reach 1753/3117 GWh in 2025/2030 and 14.7% in 2023-2030 CAGR, of which power battery shipments will reach 1398/2555 GWh, 2023-2030 CAGR is 16.5%, corresponding to global diaphragm demand of 314.55.8 billion square meters, 2023-2030CAGR is 14.8%, and the company plans to reach 16 billion square meters of diaphragm production capacity by 2027, laying the foundation for steady growth in the diaphragm business. We expect the company to ship 2.8 billion square meters of diaphragms in 2023, +65% year-on-year, and is expected to reach 3.6-4 billion square meters in 2024, an increase of 29%-43% over the previous year. In terms of profit, the company's fifth-generation production line was put into operation, and the single-line production capacity reached 250 million square meters, with significant cost reduction effects. At the same time, along with the steady increase in the share of overseas customers and the increase in coating ratio, we expect the company to maintain a profit of more than 0.3 yuan for single diaphragms in 2024.
3) Investment advice: Maintain profit forecasts and maintain the “increase in holdings” rating. Considering the competitive situation in the industry, the company has announced its performance situation. We maintain our original profit forecast. We expect net profit from 2023-2025 to be 9.12/11.38/1,297 billion yuan, respectively, with a year-on-year growth rate of 26.8/24.8/ 14%, and diluted EPS of 0.71/0.89/1.01 yuan respectively. The current stock price corresponding to PE is 20.8/16.6/14.6 times, maintaining the “increase in holdings” rating.
Risk warning:
Downstream demand falls short of expectations; production progress falls short of expectations; cost reduction falls short of expectations