Core views

Hunan Zhongke Star City Graphite Co., Ltd., a holding subsidiary of Hunan Zhongke Electric Co., Ltd., recently signed a “Nomination Agreement” (“Nomination Agreement”) with a battery subsidiary of an internationally renowned overseas car company. The company's holding subsidiary will supply lithium-ion battery anode material products on a targeted basis to the international customer. The overseas market is an important strategic market for the company. It has now achieved batch supply to both SK On and LGES in South Korea. This time, it has been designated by international customers. It is another major breakthrough in overseas market development for the company's anode materials business. It will further increase the company's share of overseas markets and the level of internationalization, which is conducive to enhancing the company's overall competitiveness in the field of anode materials for new energy lithium-ion batteries.

occurrences

Hunan Zhongke Star City Graphite Co., Ltd., a holding subsidiary of Hunan Zhongke Electric Co., Ltd., recently signed a “Nomination Agreement” (“Nomination Agreement”) with a battery subsidiary of an internationally renowned overseas car company. The company's holding subsidiary will supply lithium-ion battery anode material products on a targeted basis to the international customer.

Brief review

Expanding customer coverage and continuing to increase overseas markets based on overseas customers such as SK and LG is an important strategic market for the company. It has now achieved batch supply to SK On and LGES in South Korea. This time, it has been designated by international customers. It is another major breakthrough in the overseas market development of the company's anode materials business. It will further increase the company's share of overseas markets and the level of internationalization, which is conducive to enhancing the company's overall competitiveness in the field of anode materials for new energy lithium-ion batteries.

In 23 years, falling prices and high inventory prices affected net profit, reducing costs and increasing efficiency helped gradually improve profits

In 2023, the market sales price of graphite anode materials, the company's main product, dropped by a certain margin compared to the beginning of the period. At the same time, the cost pressure brought about by the combined consumption of the previous year's high-priced inventory had a significant impact on current net profit. In response to this, in 2023, the company adopted a series of cost reduction and efficiency measures. As the company progressed with new production capacity construction projects, the graphitization self-sufficiency rate reached more than 70%, and profitability was improved quarterly, and positive profits were achieved throughout the year.

Investment advice: The company's overseas business continues to expand, and sales of new energy vehicles in the domestic and European markets will continue to increase anode shipments. However, the short-term supply side of domestic anodes is sufficient, and there are still uncertain factors on the price side. We expect the company's net profit to return to mother of 40 million yuan and 250 million yuan in 2023 and 24, corresponding to 160 or 25 times PE.