The company's recent situation
On March 13, the company held a V-cylindrical battery production ceremony in Jingmen. The 18 production lines of its V-cylindrical battery factory have reached full production. The downstream V-cylindrical battery (that is, 18650 batteries and 21700 batteries, the same below) is mainly used in consumer fields such as electric tools, two-wheelers, and garden tools.
reviews
Downstream restocking of power tools began, and the release of cylindrical production capacity drove the increase in shipments. At the industry level, we have recently observed that downstream stocks of power tools have begun to be replenished. We believe that in the short term, it is expected to drive the company's cylindrical battery shipments growth; in the medium to long term, we believe that the US real estate industry will recover or continue to catalyze demand for power tools, and electrification in the motorcycle sector in Southeast Asia and other regions is also expected to increase demand for cylindrical batteries. At the company level, the company plans to expand the production capacity of cylindrical batteries. Currently, the maximum production capacity of the cylindrical plant exceeds 1.5 billion units. Subsequent companies will continue to promote the construction of V-cylinder plants in Chengdu and Malaysia. We expect to expand the production capacity of cylindrical batteries to 2.35 billion by 2026. We believe that high downstream demand is expected to support the release of the company's cylindrical battery production capacity and increase in shipments.
Large cylindrical batteries have been mass-produced and loaded, and they are optimistic that large cylinder technology will help increase the company's share. At present, the first production line of the company's Jingmen 20GWh large cylinder factory has stable production, and its three-yuan large cylinder products have been loaded and marketed with the JAC Ruifeng RF8. We estimate that the yield rate has increased to 90% +. Looking ahead, we believe that 2024 is expected to become the first year of large cylinder release, and the accelerated introduction of energy storage by domestic car companies, and the accelerated introduction of energy storage, 2024 is expected to be the first year of mass production by overseas car companies such as BMW, and may bring further growth in 2025. According to the company announcement, the company has now been targeted by many domestic and foreign car companies, and plans are to build large cylindrical battery production capacity in Shenyang and Hungary. We believe that bulk shipments of cylinders will continue to help increase the company's market share in the medium to long term.
Based on the product quality strategy, we will comprehensively improve delivery standards. The company plans to focus on improving product delivery standards in 2024 and expanding market share through product quality improvement. In the consumer sector, the company's v-cylindrical battery factory adopts PPB-level quality management goals, continuously promotes the digital upgrading of quality management, and enhances quality management capabilities throughout the life cycle, value chain, and entire industry chain. In the field of power and energy storage, the company uses automobile production standards to manage battery production, solve key detailed problems in the production process, and improve product delivery indicators. We are optimistic that the company will work hard for 24 years to achieve the first-class level of product delivery quality in the industry.
Profit forecasting and valuation
We maintain our 2023-2025 profit forecast of 41.34/49.46/6.207 billion yuan, and maintain the industry rating and target price. The current stock price and target price correspond to 17.3x/13.7x P/E and 20.7x/16.5x P/E in 2024/2025, respectively, with 19.9% upside.
risks
Global NEV sales fell short of expectations, global energy storage installations fell short of expectations, and increased market competition caused production capacity utilization to fall short of expectations and profits declined.