Key points of investment
The company released its 2023 annual report, with revenue of 15.4 billion yuan, a decrease of 31%, net profit of 1.9 billion yuan, a decrease of 67%, deducting non-net profit of 1.8 billion yuan, a decrease of 67%, and gross margin of 26% for 23, a decrease of 12pct. Of this, 23Q4 revenue was 3.3 billion yuan, a decrease of 21%, net profit to mother of 140 million yuan, a 70% decrease, and a gross profit margin of 17% for 23Q4, a decrease of 7.3 pct. Other revenue for 23Q4 was $95 million, an increase of 169%, mainly due to value-added tax deductions and subsidies, and $150 million in lithium carbonate and cathode depreciation in 23Q4.
The reduction in the price of hexafluoride has put pressure on electrolyte profits, and the unit profit for 24 years is expected to drop to about 20,000 yuan.
In terms of shipments, the company shipped 396,000 tons of electrolyte in '23, an increase of 24%, with a domestic market share of 36.4%. Among them, in 23Q4, we expect to ship 110,000 tons+, a drop of about 5%. Starting in March '24, we expect to ship nearly 90,000 tons in 24Q1, a drop of about 20%, and we expect to ship 500,000 tons+ in '24, maintaining a 25% increase. In terms of profit, we expect a profit of nearly 50,000 yuan per ton of electrolyte in 23, a decrease of about 65%. Among them, the 23Q4 electrolyte business contributed 32 to 330 million yuan in profit, corresponding to a net profit of about 30,000 yuan per ton, a reduction of about 20%. This is mainly due to the price reduction of hexafluoride starting September 23. The price of hexafluoride bottomed out in 24Q1, and the price of lithium carbonate increased, and the price of hexafluoride followed a slight rebound. The company's hexafluoride still has a cost advantage of 20,000 to 20,000 yuan/ton, corresponding to a profit of 0.1-20,000 yuan per ton of thickening electrolyte, increasing the LIFSI addition ratio and introducing core lithium iron customers, increasing the addition ratio of fast charging to 3%-5%, and implementing new production capacity such as DTD and ODFP additives. We expect the profit per ton to drop to about 20,000 yuan in 24 years.
Iron phosphate 23Q4 deducted value, and the daily chemical business steadily contributed to profit growth. We expect 23Q4 to lose 150 million yuan in iron phosphate and lithium iron, including operating losses of 60 million yuan+ and deductions of 80 million yuan+. Currently, the company's high-priced inventory has basically been calculated, and it is expected to achieve break-even after 24 years of scaling up. In addition, daily chemical materials' revenue in 23 was 1 billion yuan, down 10%; sales volume was 109,000 tons, up 12%; gross profit margin was 36%; and the same increase was 6pct. We expect to contribute about 250 million yuan in profit in 23 and maintain steady growth in 24-25 years.
Capital expenditure slowed in '23, and inventories fell significantly. In 23, the company's expenses were 1.5 billion yuan, and the cost rate for the period was 10%, an increase of 3 pcts. Of these, the 23Q4 period cost was 320 million yuan, a 26% reduction, and the 23Q4 cost ratio was 9.7%, and a decrease of 0.7 pct. Inventory at the end of '23 was 1.2 billion yuan, down 51% from the beginning of the year, down 34% from the end of 23Q3; net cash flow from operating activities in '23 was 2.3 billion yuan, down 45%; capital expenditure was 3.1 billion yuan, down 16%; and projects under construction were 2 billion yuan, down 22% from the beginning of the year.
Profit forecast and investment rating: Considering the decline in the company's product prices, we lowered the company's 2024, raised the 2026 net profit forecast to 12.13/21.06/3.104 billion yuan (the original forecast for 2024-2025 was 15.62/2,069 billion yuan), -36%/+74%/+47%, corresponding PE was 32x/18x/12x, considering that the company is at the bottom of the cycle, and future price recovery is more flexible, maintaining the “buy” rating.
Risk warning: Electric vehicle sales fall short of expectations, and profit levels fall short of expectations.