In 2023, the company achieved net profit of 1.8-20 billion yuan, -65% to -69% year-on-year. Tianci Materials predicts that in 2023 it will achieve net profit of 1.8-20 billion yuan, -65% to -69% year-on-year, and that 2023Q4 will achieve net profit of 50 million yuan to 250 million yuan, -82% to -96% year-on-year, and -45% to -65% month-on-month. The main reasons for the year-on-year decline in the company's disclosure of 2023 results were: 1) the price of electrolyte products fell sharply in 2023 compared to 2022, and unit profit declined; 2) iron phosphate products climbed slowly, market prices continued to decline, and profit conditions were poor; 3) the company's asset impairment losses for lithium carbonate and iron phosphate products at the end of the year affected the company's profits.
Electrolyte sales are rising steadily, and electrolyte profits are expected to bottom out and stabilize. We estimate that the company will ship 110,000 tons of electrolyte in 2023Q4, -6% month-on-month, and that the company's electrolyte shipments for the full year of 2023 will be about 400,000 tons, +25% year-on-year. According to the Q4 performance forecast's median net profit of 150 million yuan, the company's net profit per ton of Q4 electrolyte was estimated to be about 1,400 yuan (-39% month-on-month). The month-on-month decline in net profit per ton was mainly affected by price adjustments for Q4 electrolyte products and the company's impairment losses on raw materials lithium carbonate. Looking ahead to 2024, the electrolyte industry's production capacity is coming to an end. At the same time, the company's electrolyte product profit is expected to bottom out and stabilize.
The company's electrolyte leader position is stable. Global demand for lithium batteries continued to grow steadily in 2023. We estimate that lithium battery shipments will reach 1,220 GWh in 2023, +38% year over year, corresponding to global electrolyte demand of 1.34 million tons. Tianci Materials's global market share is 30%, the same as the previous year. We expect global lithium battery shipments to be 1,382 GWh in 2024, +13% year over year, corresponding to 1.5 million tons of electrolyte demand. We expect Tianci Materials's global market share to increase to 32%-34% in 2024.
Profits in the iron phosphate business continue to be under pressure. We estimate that the company will ship 39,000 tons of iron phosphate for the full year of 2023, +3% year over year. Affected by the decline in the price of iron phosphate products and the company's impairment losses on iron phosphate inventories, we estimate that the business lost 150 million yuan for the whole year. Along with subsequent price stabilization of iron phosphate products and the effects of the company's production scale, the company's iron phosphate business losses are expected to gradually narrow.
Risk warning: downstream demand falls short of expectations; production progress falls short of expectations; raw material prices have risen above expectations.
Investment advice: Lower profit forecasts and maintain a “buy” rating. According to SMM Shanghai Nonferrous Metals Network data, the total price of electrolyte products dropped 80% to 21,800 yuan/ton in 2023. We expect the price of electrolyte products to gradually stabilize in 2024, and the company's profit per ton of electrolyte will bottom out. We expect the company's profit per ton to be 2,500 yuan (-45%/0% YoY) in 2024/2025, and the electrolyte shipments in 2024/2025 will be 50/600,000 tons (+25%/+20% YoY), respectively. We have lowered our original profit forecast, and we expect to achieve net profit of 19.39/14.89/1,867 billion yuan respectively in 2023-2025 (the original forecast was 23-25 (22.51/24.51/2,727 billion yuan), year-on-year growth rates were -66.1%/-23.2%/25.4%, and diluted EPS was 1.01/0.77/0.97 yuan, respectively. The current stock price corresponding PE was 18.5/24.2/19.3 times, respectively, maintaining the “buy” rating.