Matters:

Performance forecast: The company's 23 annual return profit was 0.3 to 47 million yuan, a year-on-year decrease of 87%-91%; after deducting non-profit 0.60-78 billion yuan, a year-on-year decrease of 83%-87%.

Among them: 23Q4's net profit was 0.8-104 million yuan, with a median of 0.96 million yuan, up 255% year on year, up 40% month on month; after deducting non-profit, 0.87 to 105 million yuan, median of 96 million yuan, up 1967 percent year on year, up 15% month on month.

Commentary:

Various operating indicators continued to improve, and profits increased quarterly. During the reporting period, the market sales price of the company's main product, graphite anode materials, declined by a certain margin compared to the beginning of the period. At the same time, the cost pressure brought about by the consumption of the previous year's high-priced inventory had a significant impact on current net profit. In 2023, the company adopted a series of cost reduction and efficiency measures, and profitability improved quarter by quarter. Net profit to mother in Q1/Q2/Q3 was -1.35/0.10/0.69 billion yuan respectively. The median net profit for Q4 increased quarterly and achieved positive profit throughout the year.

Collaborative development of multiple businesses. Graphitization: The company continues to improve its level of graphitization. As the company progresses with new production capacity construction projects, the graphitization self-sufficiency rate has reached more than 70%. Anode materials: The company is actively expanding the field of energy storage. Currently, anode products are supplied in batches to energy storage projects. In terms of production capacity, the first phase of the Gui'an New Area base project is in the production capacity expansion stage. The Qujing base project in Yunnan is being actively promoted, and related production lines have been completed and put into operation one after another. Magnetoelectric equipment: Give full play to the synergetic advantages of the magnetoelectric equipment business and the lithium battery anode business, and maintain steady growth in the traditional main business.

Overseas market expansion is accelerating, and fast charging has been applied in batches on clients. The overseas market is an important strategic market for the company. Currently, bulk supply has been achieved for SK On and LGES in South Korea, and the development of other overseas customers is progressing according to plan. In addition, the company is actively promoting various overseas expansion efforts to further increase the proportion of overseas sales in the lithium battery anode business. The company's fast charging anode products have been successfully used in batches on clients, received good feedback from the market in terms of product performance and cost performance, and have become one of the company's main products. The company's production line production capacity can meet the market's demand for fast charging anode products.

Investment advice: The company is affected by fluctuations in raw materials in the short term, but profitability has continued to recover since 23Q3. With the release of the company's new production capacity and the expansion of overseas customers, we expect the company to continue to maintain good profitability, but the industry price war still exists. We adjusted the company's net profit for 2023-2025 to be RMB 0.42/4.06/514 million (original value of RMB 0.05/484 million yuan), respectively, and maintained the “strong” rating.

Risk warning: downstream demand falls short of expectations; capacity expansion falls short of expectations; graphitization support falls short of expectations; risk of worsening supply and demand in the anode industry, etc.