Dry and wet methods go hand in hand, and production capacity is distributed globally. The company has been deeply involved in the diaphragm industry for 20 years and has a complete dry and wet method layout. In recent years, with the rapid development of the NEV and lithium battery industries, revenue and profit have increased dramatically. Since 2023, against the backdrop of a slowdown in industry growth, steady growth has been maintained in the first three quarters. The company is actively promoting overseas production capacity construction, the Swedish base is gradually put into operation, and Malaysia has added plans to provide a solid production capacity guarantee for global development.
Diaphragm industry: Global demand is on the rise, and industry barriers remain stable. We expect global demand for diaphragms to exceed 37 billion square meters by 2025, and there is plenty of room for growth. However, with their scale, cost and technical advantages, domestic diaphragm companies have become the core supply force for global diaphragms. In the downturn in diaphragm prices, enterprises entering across borders in the current cycle faced pressure to reduce prices as soon as production capacity was released, and continued development was blocked; for potential new entrants, suppression of low profits combined with tightening of the financing environment, making it even more difficult to break through. Industry barriers are high, and supply-side expansion may fall short of expectations.
Wide production lines have improved efficiency and reduced costs, and increased cost competitiveness. The company's new-generation 8-meter wide-width wet production line was successfully put into operation. The production capacity of the single line was increased to 250 million square meters, and efficiency, depreciation, and costs were all greatly optimized. Combining measures such as technological reform of the company's old production line, reduction of unit labor, improvement of coating efficiency, and optimization of raw material costs, etc., the company achieved remarkable results in reducing costs. In the future, as the share of advanced and efficient production capacity increases, the company's overall production efficiency will increase dramatically, and cost-side competitiveness is expected to increase.
The number and profit growth of overseas customers is steady, and the share is expected to continue to rise. The company is deeply connected to major international customers, and overseas revenue is expected to account for about 40% this year. Recently, the company reached a strategic cooperation agreement with LGES and received another 12 billion square meters of diaphragm procurement intentions from 2024-2030. The release of a large number of new overseas projects starting in '24 will drive a continuous increase in the share of overseas business. Considering the relatively higher profit level of overseas products, the company's profit structure is expected to be further optimized.
With advanced production capacity and support from overseas customers, the company's cost and profit-side optimization logic are stronger than the industry, and market share is expected to expand. We forecast the company's earnings per share for 2023-2025 to be 0.70, 0.90, and 1.10 yuan respectively. Combined with the valuation levels of mainstream comparable companies in the lithium battery industry chain, we gave the company a PE valuation of 20 times in 2024. The company's reasonable total market value was 24.18 billion yuan, and the corresponding target price was 18.00 yuan, giving it a buying rating for the first time.
Risk warning
Demand for lithium batteries falls short of expectations; changes in power battery technology routes; product prices have declined due to increased industry competition; changes in assumptions affect measurement results; the company's overseas projects have not progressed as expected, etc.