Core views

The company's issuance of 33,471,626 A shares to 24 specific targets in 2023 was lifted on February 19. The unbanned shares account for 12.41% of the company's total share capital, which may have an impact on stock prices in the short term. Long-term, along with the commissioning and climbing of the company's overseas factories in Sweden, Germany, and Hungary, it will achieve global expansion. The company's revenue growth rate is expected to be comparable to the industry's growth rate. Overseas policies cannot change the automobile industry chain supply in the short term, and the impact on the company's performance is limited. Profitability of heavy asset companies may be able to replicate Q4 beyond expectations when their operating rates are full.

occurrences

Incident 1: The company's 23-year performance forecast achieved net profit of 1.08 to 1.28 billion yuan, a year-on-year increase of +19.84% — 42.04%, higher than Wind's agreed expectations.

Incident 2: The ban on the company's issuance of 33,471,626 A shares to 24 specific targets in 2023 was lifted on February 19. The unbanned shares accounted for 12.41% of the company's total share capital.

Incident 3: Bloomberg reports that the Biden administration is considering imposing restrictions on imports of China's “smart cars” and related parts, raising market concerns that the export of electric vehicle parts and battery industry chains will be subject to tariffs in the future, disrupting the company's stock price in the short term.

Brief review

At the performance level, the company's 2023 performance forecast surpassed unanimous expectations. The median forecast corresponding to Q4 net profit was 380 million yuan. According to production data from the Power Industry Alliance, 23Q4 power battery production was +14.6% month-on-month. Since the company is a structural component leader with a market share of about 40%, the expected revenue growth rate is close to the growth rate of battery shipments. Q4 revenue is expected to be around 30e. According to estimates, the net profit margin for Q4 is expected to exceed 12%, which is a significant month-on-month increase.

In 24, we expect global tram sales to grow by more than 18% and lithium battery demand by more than 23%. As a leading company covering well-known foreign customers such as CATL, BYD, Everweft Lithium, Sunwoda, LG, Panasonic, Samsung, and Northvolt, the company will achieve global expansion along with the climbing of overseas plants in Sweden, Germany, and Hungary. The company's revenue growth rate is expected to be comparable to the industry's growth rate, and the profitability of heavy asset companies may exceed expectations.

At the financial level, in the short term, the proportion of shares lifted from the ban is 12.41% of the company's total share capital. Changes in shareholders' positions may have a certain impact on the stock price, but this impact is relatively short-term. The core focus is on the company's long-term performance trends. We expect the company's market value to show a steady upward trend in performance over the long term.

At the policy level, Bloomberg reports that the Biden administration is considering imposing restrictions on imports of China's “smart cars” and related parts, raising market concerns that the electric vehicle parts and battery industry chain will be subject to tariffs in the future. Structural components, as battery materials that were not previously restricted by the IRA policy, will have a significant marginal impact if restricted. We believe that at present, overseas structural parts companies have limited production capacity. The company's Swedish, German, and Hungarian factories are full of orders, the fixed cycle for auto parts is long, the overseas production capacity for battery structural parts is low, capital costs for expanding production are high, and battery stamping products in production require high coating and anti-corrosion processes. It is currently difficult for second-tier companies to catch up, and the company's market share is still very certain.

Investment advice: The company's net profit for 23/24/25 is estimated to be 11.7/12.5/1.59 billion yuan, and the PE corresponding to the current stock price is 15.63/14.63/11.49 times, giving it a “buy” rating.

Risk analysis

1) Downstream NEV production and sales fall short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, power restrictions, etc., which in turn affects the company's related business shipments and profitability.

2) The rise in raw material prices exceeded expectations: Prices of raw materials such as copper and aluminum fluctuated greatly in stages. High prices and instability had a certain impact on terminal demand, and at the same time disrupted the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.

4) If the Biden administration imposes restrictions on the import of China's “smart cars” and related parts, we expect 2 types of impact on the company and downstream. ① Tariffs will only be increased on structural parts exported to North America separately. According to Kodali's recent data (23H1 revenue split), overseas revenue currently accounts for 5.3% of total revenue. Based on the 24-year domestic/US/European and other battery demand growth rate of 23%/32%/25% analysis, it is predicted that if the company's overseas market share does not increase, it corresponds to 7.4e of the total revenue in 2012, which accounts for only 5.67% of total revenue, if Under particular pessimism, consider completely losing the US market. Since the total volume of the US market is less than 1/2 of the overseas market, the revenue impact is expected to be less than 3%, which will have less impact on the company's performance. ② If it is not for structural parts, but for downstream parts, then tariffs may increase on the battery as a whole. We analyzed that if the US were to achieve train sales of around 2 million in 24 years, then the 24-year battery production capacity gap in the US would reach 68% (including power and battery). The superimposed power battery had a fixed cycle of two years ahead of schedule, and there were no current conditions for changing suppliers. Otherwise, it would cause a large number of US OEMs to stop production, so the US must rely on Chinese batteries in the short term. Moreover, Chinese batteries are currently subject to an additional 7% tariff, and they are not receiving IRA subsidies. If additional tariffs continue to be raised under these conditions, it will be detrimental to the clean energy plan that Biden wants to implement, and ultimately affect the production of US car companies.