Core views
The company released the 2023 performance report, which returned 1.908 billion yuan for the whole year, -66% year over year; deducted no 1.83 billion yuan, -67% year over year. Q4 Single quarter revenue of $3.38 billion, accounting for $156 million, -88% YoY, -66% month-on-month; deducted less than $120 million, -91% YoY, -73% month-on-month. Previously, the company had predicted net profit of 1.82 billion yuan to mother in 2023, -68.50% ~ -65.00% year-on-year; deducted non-net profit of 17.2 to 1.92 billion yuan, -68.95% ~ -65.34% year-on-year.
According to the forecast median value of Q4, it corresponds to net profit/deducted non-net profit of 148 million/110 million dollars. There was not much difference between the express report and the median forecast, and overall it was in line with expectations.
occurrences
The company released the 2023 performance report
The announcement showed annual revenue of 15.506 billion yuan, a year-on-year decrease of 30.52%; annual revenue of 1.908 billion yuan, -66% year over year; deducted non-performance of 1.83 billion yuan, -67% year over year. Looking at Q4 alone, revenue was 3.38 billion, down 42.6% year on year, down 18.3% month on month; due to mother of 156 million yuan, -88% year on month, -66% month on month; deducted not 120 million, -91% year on month, and -73% month on month.
Brief review
The performance is basically in line with the median value previously forecast
Previously, the company had predicted net profit of 1.82 billion yuan to mother in 2023, -68.50% ~ -65.00% year-on-year; deducted non-net profit of 17.2 to 1.92 billion yuan, -68.95% ~ -65.34% year-on-year. According to the forecast median value of Q4, it corresponds to net profit/deducted non-net profit of 148 million/110 million dollars. There was not much difference between the express report and the median forecast, and overall it was in line with expectations.
The decline in performance was mainly due to a decrease in gross profit per unit of electrolyte products, falling short of expectations in the iron phosphate business, and depreciation in inventory prices
The company's performance declined significantly, mainly due to:
(1) The gross margin of electrolyte products declined.
Electrolytes are the company's main product and revenue source. The company reported a gross sales margin of 24.32% for the third quarter of 2023, down 11.85 pcts year on year and 5.99 pcts month on month. Looking at the full year of 2023, the decline in revenue was 30.52%, while the decline in operating profit was 65.41%, which was significantly greater than the decline in revenue, mainly due to the decline in gross margin.
(2) The new production capacity of iron phosphate products, which are precursors of cathode materials, is slowly climbing, prices continue to fall, and overall profits fall short of expectations.
The company's production capacity is planned to be about 350,000 tons. Profits declined due to the slow rise in production capacity and the rapid decline in product prices.
(3) Inventory price depreciation further affects the company's profits.
As of the end of the third quarter, the company's inventory was about 1.77 billion yuan. Prices of raw materials such as lithium carbonate dropped significantly in the fourth quarter, and preparations for the price reduction of the company's lithium carbonate and iron phosphate meter for cathode materials increased.
Performance forecasts
The company's electrolyte shipments in 2024 and 2025 are estimated to be 500,000 tons and 600,000 tons respectively. Considering the price of a single ton of about 22,000 yuan/ton, the net operating profit of a single ton is about 0.25 million yuan/ton and 0.34 million yuan/ton, respectively, and considering business profits such as rubber products, additives, iron phosphate, and daily chemical products, the company's net profit for 2024 and 2025 is estimated to be 16.24 billion yuan and 2,671 billion yuan respectively. Considering the slowdown in downstream demand growth and the release of upstream raw material production capacity, we believe that the price of electrolytes and profit per ton will remain in the bottom range, giving the company an “increase in weight” 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 has exceeded expectations: Since 2021, raw material prices have continued to rise, and raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, and at the same time disrupted the company's short-term performance.
3) The impact of price drops on impairment losses: Over the past 23 years, upstream lithium carbonate in the industry has affected the procurement rhythm of cathodes, electrolytes, etc., and the period of price decline has caused the company to lose a lot of price losses.
4) 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.