The 4Q23 performance forecast slightly exceeded our expectations

The company released its 2023 performance forecast: The full year of 2023 is expected to achieve net profit of 33 million yuan to 47 million yuan, a year-on-year decrease of 87%-91%; net profit without deduction of 60 million yuan to 78 million yuan, a year-on-year decrease of 83%-87%. Corresponding to 4Q23, it is expected to achieve net profit of 89 million yuan to 104 million yuan, turning a loss from year on year to profit (vs. 4Q22 loss of 62 million yuan), with a month-on-month increase of 30%-51%; net profit after deducting non-return to mother of 0.87 to 105 million yuan, turning a year-on-year loss into profit (vs. 4Q22 loss of 0.05 billion yuan), an increase of 4%-26% month-on-month.

Key points of interest

Shipments grew steadily, and profits recovered quarterly. In terms of shipment volume, we expect the company's 4Q23 anode shipments to be ~50,000 tons, an increase of 20% + month-on-month, and the annual shipment volume is expected to reach ~150,000 tons in '23. In terms of profit, along with the gradual recovery of the company's operating rate, the digestion of high-priced raw material inventories, and the adoption of cost reduction and efficiency measures to improve profits, the company's profitability was restored quarterly. Based on the median performance forecast, we expect the company's 4Q23 profit per ton to be 20,000 yuan/ton, an increase of 10% + over the previous month.

Fast charging products are released quickly, and overseas markets continue to expand. The company's fast charging anode products have been used in batches on clients, and we believe it is expected to further increase the company's competitive advantage and increase its profit level per ton. In addition, the company is actively expanding overseas customers. It has achieved batch supply to SK On and LGES in South Korea, and development of other overseas customers is progressing according to plan.

The graphitization process continues to reduce costs, and production capacity construction is progressing steadily. The company continuously improves its graphitization technology level and profitability in terms of energy saving and cost reduction, increasing the degree of automation, and reducing pollutant emissions. In terms of capacity construction, the first phase of the Gui'an New Area base project entered the production capacity climbing phase in the second half of '23, and some production lines for the 50,000-ton anode project in Qujing, Yunnan have already been completed for trial production.

Profit forecasting and valuation

Considering that negative electrode prices have been under pressure since the end of 23, we lowered our 23/24 profit forecast by 7%/3% to 0.4 billion yuan, and introduced a 25-year profit forecast of 50 million yuan. The company is currently trading at 15/12 times the 24/25 price-earnings ratio. Considering the decline in the industry valuation center, we lowered the target price by 29% to 10 yuan, which corresponds to 18/15 times the 24/25 price-earnings ratio and 24% upward space; maintaining the outperforming industry rating.

risks

Sales of new energy vehicles fell short of expectations, raw material prices fluctuated greatly, and industry competition increased risks.