Description of the event
The company released its 2023 annual report. The company achieved annual revenue of 15.405 billion yuan, a year-on-year decrease of 30.97%, and attributable net profit of 1,891 billion yuan, a year-on-year decrease of 66.92%, after deducting non-net profit of 1,824 billion yuan, a year-on-year decrease of 67.08%. The split into 2023Q4 achieved operating income of 3.281 billion yuan, a year-on-year decrease of 44.29%, a year-on-month decrease of 20.7%, and attributable net profit of 139 million yuan, a year-on-year decrease of 89.74%, a year-on-month decrease of 70.0%, after deducting non-net profit of 114 million yuan, a year-on-year decrease of 91.1% and a year-on-month decrease of 73.9%.
Incident comments
On a full-year perspective, the lithium battery materials business achieved revenue of 141 billion yuan, a year-on-year decrease of 32.26%. Among them, the annual electrolyte sales volume was 396,000 tons, an increase of about 24%; in terms of profit, the gross profit margin of the lithium battery materials business was 25.26%, a year-on-year decrease of 13.29 pcts. Considering the depreciation of lithium carbonate, the net profit per ton of electrolyte operating is about 5,200 yuan. In addition, the company accrued credit impairment losses of RMB 25 million and asset impairment losses of RMB 182 million, for a total reduction of 210 million yuan. The daily chemical business achieved annual revenue of 1.02 billion yuan, down 10.4% year on year, while gross margin was 35.84%, up 6 pct year on year. Major customer marketing strategies led to a 7.6% year-on-year increase in gross profit to 360 million yuan.
On a quarterly basis, the company is expected to ship about 112,000 tons of electrolyte in 2023Q4, which is basically flat from month to month, which is in line with the industry level. In terms of profit, after recovering from impairment, the net profit per ton of electrolyte is 2000-2,500 yuan; the iron phosphate business is expected to ship about 30,000 tons, with an operating loss of about 50 million yuan, with a combined impairment value of about 150 million yuan; the traditional daily chemical business is 0.7-80 million yuan, which remains stable from month to month; the gross profit of the resource recycling business is positive, with a loss of 0.2 to 0.3 billion yuan after amortization, plus VAT deduction of about 58 million yuan.
In terms of the cost ratio, the company's expense ratio was about 10% during the 2023 period, up 2.9 pct year on year. Among them, the sales expense ratio and R&D expense ratio increased year on year; the 2023Q4 cost rate was about 9.7%, down 0.7 pct from month to month. The month-on-month sales expense ratio, management cost rate, and R&D expense ratio all improved.
According to other financial indicators, the company's net operating cash flow inflow in 2023 was 2.27 billion yuan, down 45.4% year on year; capital expenditure in 2023 was about 3.1 billion yuan, down 15.7% year on year. At the same time, the company announced the extension of some fund-raising projects to extend the completion time of the lithium-ion battery material project (Phase I) with an annual output of 41,000 tons until December 31, 2025, a delay of 20 months.
Looking ahead, against the backdrop of oversupply and falling lithium prices, the company's profits are under significant pressure. However, in 2023, the company fully calculated impairment losses for lithium carbonate and iron phosphate, and the risk was basically cleared. With cost advantages and LIFSI product upgrades, it is expected that it will continue to grow in a lightweight package; as the pace of industry capacity investment slows down and the supply and demand pattern further improves, the company's operating profit is expected to bottom out in 24Q1, and 24Q2 is expected to achieve marginal improvement. Furthermore, the company's annual production of 200,000 tons of electrolyte and overseas bases such as Morocco's integration project is progressing smoothly, and it is expected that overseas markets will be further opened up to increase profits. It is expected to achieve net profit of 1.32 billion yuan in 2024, corresponding to PE 32 times, and continues to be recommended.
Risk warning
1. The risk of a downturn in industry sentiment;
2. The risk that profitability falls short of expectations due to increased competition in the industry.