The new product cycle kicks off the “CATL inside” cycle, and the position of the industrial chain is consolidated. Through analysis of the company's working capital turnover ratio and net business cycle, we found that the company's upstream and downstream bargaining power remained strong, and the amount of upstream capital occupied by raw materials was reduced; the shortening of the 23-year net business cycle came from an increase in inventory turnover, which weakened downstream bargaining power. As the “circle of friends” of Fast Charging and Kirin Batteries launched in the second half of the year 23 of the Ningde Era continues to expand, “CATL Inside” will further seize consumers' mentality about the quality of power batteries, and the ability to bargain downstream is expected to increase. Unlike the bargaining power established by the differentiation of TOB-side products in '18, this is a leap from the Ningde era as a manufacturing leader to establishing a brand effect on the TOC side.
Aggressive equipment depreciation and depreciation maintains technical competitiveness. After the peak depreciation period, the new technology licensing model is expected to increase profit margins. In 23, we calculated that the average depreciation period of the company's equipment was 3.27 years, 0.86 years shorter than the previous year. It was mainly due to equipment cost reduction and efficiency and the company's calculation of equipment impairment, making sufficient preparations for potential future market competition and technology iteration. From the perspective of changes in the EBITDA segment structure, depreciation changes brought about by the capital expenditure cycle had a great impact on the profit shown on the reporting side. The company's current round of capital expenditure peaked in 21-22 and declined in 23. Combined with the company's aggressive depreciation policy, the net profit on the reporting side is expected to improve after the peak of depreciation and amortization in 25-26. Furthermore, the company and overseas car companies such as Ford explore overseas markets through an asset-light model authorized by technology. Although the scale of revenue has been reduced, the corresponding capital expenditure is lower. While increasing overseas market share in the long term, it is expected that profit margins will increase.
It is expected that the debt accrual ratio will increase, and the reservoir will cushion the impact of price reductions. In '23, the company's comprehensive after-sales service fee increased by 101% year on year, far exceeding the revenue growth rate. The billing ratio increased by 1.42 pct year on year. Judging from the 22-year billing ratio, this is equivalent to an additional charge of about 5.7 billion yuan. Sales rebates can be viewed as commercial discounts and do not distort gross margins.
How to achieve the leap from growth to value? Since 2018, the company's profit margin has declined markedly. Simultaneously with this, the scale of upstream and downstream accounts payable has increased. This is equivalent to interest-free debt. By exchanging profit margins for cash, it has achieved self-hematopoiesis, rapid expansion, and raised the ROE level. Looking ahead, as the Ningde era passed through the peak capital expenditure period and growth rate slowed, and new paradigms of overseas cooperation such as technical licensing reduced leverage ratios, brand effects further enhanced the bargaining power of the industrial chain, and net interest rates are expected to gradually increase, thus maintaining a high level of ROE and achieving a leap forward from growth to value.
Profit forecasting, valuation and rating: The power and energy storage battery industry has high technical barriers, and product differentiation, capacity scale and lean manufacturing have built a deep moat. Maintaining the 24-26 net profit forecast of 452/572/68.3 billion yuan, the current stock price corresponding to 24-26 PE is 18/15/12X. The company continues to increase its market share with technical advantages, customer advantages, scale advantages, etc., to build the brand effect of a leading global high-end manufacturing leader. PE valuation has reached the bottom range in history, maintaining a “buy” rating.
Risk warning: NEV sales fall short of expectations, demand for energy storage falls short of expectations, overseas policy risks.