Incident: The company released its 2023 financial report, achieving total operating revenue of 15.405 billion yuan, a year-on-year decrease of 30.97%, and net profit attributable to shareholders of listed companies of 1,890 billion yuan, a year-on-year decrease of 66.92%. The company plans to pay a cash dividend of 3 yuan (tax included) to all shareholders for every 10 shares, and the dividend ratio exceeds 30% of net profit due to mother in 2023.

Focusing on the electrolyte industry chain, shipments continue to grow. Global new energy vehicles and energy storage continue to grow rapidly, and demand for lithium batteries continues to be strong. As an important material for lithium batteries, electrolytes play a role as a medium for transferring ions and have an important impact on battery performance. As a leading company in the industry, the company has continuously improved the electrolyte industry chain and increased the self-supply ratio of core materials. The self-supply ratio of liquid lithium hexafluorophosphate and LiFSi reached more than 93%, and the self-supply ratio of some core additives reached more than 80%. In order to meet customer needs, the company has set up supply bases in many regions at home and abroad to ensure flexible delivery capabilities. During the reporting period, the company focused on production capacity in Sichuan, Chizhou and Yichang, and continued to promote German OEM and North American projects. The company achieved sales volume of 396,000 tons of electrolyte, a year-on-year increase of 24%, and the market share is expected to be 36.4%. The decline in revenue was mainly due to falling product prices. In 2023, the company's gross margin for lithium-ion battery materials was 25.26%, down 13 percentage points from the same period last year. Currently, prices in the industry are at the bottom. We are waiting for production capacity to be cleared and the pattern will improve.

Improve the lithium battery cathode material industry chain and open up new profit growth points. Iron phosphate is an important raw material for lithium iron phosphate batteries. Demand continues to increase, but industry barriers are low, competition is fierce, prices are falling rapidly, and profits are under pressure. Therefore, the company actively adjusts and focuses on new product development, improving product performance, reducing costs, and increasing competitiveness. The company is actively promoting the integrated layout of cathode materials, building lithium carbonate purification production capacity in Jiujiang, and further improving its self-supply capacity for core raw materials. Currently, around the supply of lithium carbonate, the company has formed a business layout such as dismantling and recycling waste batteries and refining lithium carbonate to achieve comprehensive utilization of resources and increase profit growth points.

Daily chemical materials and specialty chemicals are stable. During the reporting period, the company's business segment achieved revenue of 1,017 billion yuan, a year-on-year decrease of 10.43%, and a gross profit margin of 35.84%, an increase of 6 percentage points over the previous year. The company's daily chemical materials are deeply tied to major domestic and foreign customers, and sodium taurine received a major breakthrough into the Estée Lauder supply chain system, while expanding its market share in international MNCs such as L'Oréal, Cleaning, and Unilever. This business continues to provide rich profits for the company.

Investment advice: Global demand for lithium batteries for energy storage for new energy vehicles continues to increase, and the scale of the industry continues to expand. As an important supplier of lithium battery materials, the company will benefit in the long term. We expect the current prices in the lithium battery materials industry chain to be at the bottom, and there is limited room for further decline. Considering that the decline in the price of lithium carbonate exceeded expectations and led to a reduction in revenue and profit, we expect the company's net profit to be 11.72, 20.62, and 3,031 billion yuan respectively (previous profit forecasts for 2024-2025 were 6.502 billion yuan and 8.358 billion yuan, respectively), and the corresponding PE was 35.7, 20.3, and 13.8, respectively, maintaining a “buy-B” rating.

Risk warning: NEV sales fall short of expectations; the impact of international trade frictions; the company's new production line falls short of expectations, etc.