Incident: The company released its annual report for the year 23. In 2023, it achieved revenue of 15.404 billion yuan, -30.97% year on year; net profit to mother of 1,891 billion yuan, -66.92% year on year; net profit after deduction of 1,824 billion yuan, -67.08% year on year.
Looking at a single quarter, the company achieved revenue of 3.281 billion yuan in Q4, 44.29% year-on-year, net profit to mother of 139 million yuan, -89.74% year-on-year, and net profit of 114 million yuan after deduction, or -91.10% year-on-year. 23H2 The decline in upstream lithium carbonate prices was compounded by overcapacity in the electrolyte market. As a result, the company's profitability was under certain pressure. Also affected by the decline in market prices, the company prepared 182 million yuan for inventory impairment.
Electrolyte sales have increased steadily, and there is still room for profit during the industry's trough. The company's lithium-ion battery materials business had revenue of 14.104 billion yuan in '23, -32% year on year, gross profit margin of 25.26%, and -13pct year on year. Affected by fluctuations in lithium carbonate prices in the second half of the year, the profit space of the entire lithium battery industry chain was compressed. During this period, the company continued to increase the self-supply ratio of raw materials such as liquid lithium hexafluorophosphate, LiFSi, and other core additives. In '23, the company's self-supply ratio of electrolyte raw materials reached more than 93%, and some core additives reached 80%. The integrated cost reduction layout made the company's electrolyte business still have room for profit. The company's electrolyte sales volume for the whole year was 396,000 tons, up 24% year on year. During the reporting period, the company's electrolyte market share rose to 36.4%. Q4 sales volume in a single quarter was about 110,000 tons, and the net profit per ton of electrolyte may have dropped to the level of 2,000 yuan. At present, the electrolyte industry has fully entered the bottom of the sector. The average price cost of the industry may be inverted, and the production capacity of the second and third tier has accelerated. The company's market share is expected to increase further in the future, and the recovery in the company's electrolyte capacity utilization rate is expected to gradually show scale effects. We believe that the 24H1 electrolyte sector remains at its bottom, and 24H2 is expected to pick up. The company is expected to ship 500,000 to 550,000 tons throughout the year, with a net profit margin of 2,500 to 3,000 yuan per ton.
Cathode materials fell short of expectations, and daily chemical business profits were stable. In '23, the company's iron phosphate sales achieved a significant year-on-year increase. However, due to various factors such as downstream warehousing, equipment commissioning, and imbalance between supply and demand, the overall operating rate and sales volume fell short of expectations, and profit margins were under great pressure. The company actively optimizes iron phosphate technology, improves the technical team's process management and development capabilities, and focuses on new product research and development (including stable performance of second-generation lithium iron phosphate products and third-generation product development iterations) to enhance product competitiveness and cost advantages. In '23, the company's daily chemical materials achieved sales volume of 108,700 tons, a year-on-year increase of 12%, revenue of 1,017 billion yuan, -10.43% year-on-year, and a gross profit margin of 35.84%, and +6.01pct year-on-year. The company's leading customer supply bonds have deepened, and is actively expanding emerging domestic brands. It is expected to maintain steady growth over 24 years.
Horizontal expansion of adhesive structural adhesives and in-depth layout of solid electrolyte technology. During the reporting period, the company focused on developing new materials such as adhesives and battery adhesives, and used the advantages of the lithium battery customer system to enter horizontally. It has now formed mass sales and is beginning to take shape, and is expected to provide profit support in 24 years. At the same time, the company is deeply bound to semi-solid/solid electrolyte technology, and the company's semi-solid electrolytes, oxides and sulfides have all entered the pilot phase. In terms of semi-solid electrolytes, the company's process is compatible with liquid electrolytes, research and development progress has been accelerated, and all-solid electrolyte technology has achieved accurate control of purity, particle size, and conductivity.
Investment advice: We expect the company to achieve revenue of 140.11/186.13/22.365 billion yuan in 2024-2026, net profit to mother of 1,490/19.67/2,475 billion yuan, EPS 0.77/1.02/1.29 yuan respectively, and PE 29/22/17 times, giving it a “recommended” rating.
Risk warning: Competition in the lithium battery market is intensifying, the advancement of new technology falls short of expectations, and downstream demand is sluggish.