Incident: Recently, the company released its 2023 annual report.
Comment:
The volume and price of the main products increased and fell, putting pressure on the 2023 results. In 2023, the lithium battery industry chain was dominated by inventory removal. Demand for the company's core product electrolyte slowed down, and electrolyte sales were 396,000 tons, up 24% year on year. At the same time, due to a sharp drop in raw material prices and increased industry competition, the price of the company's electrolyte products fell, leading to a decline in unit profit. Revenue of 15.405 billion yuan was achieved in 2023, a year-on-year decrease of 30.97%; net profit to mother was 1,891 billion yuan, a year-on-year decrease of 66.92%. The gross profit margin was 25.92%, down 12.05 pcts year over year. Net profit margin was 11.96%, down 14.23pct year over year. It is proposed to pay 3 yuan for every 10 shares. Among them, 2023Q4 achieved revenue of 3.281 billion yuan, down 44.29% year on year and 20.71% month on month; net profit to mother was 139 million yuan, down 89.74% year on year, down 70.02% month on month. Continued decline in product prices led to a further decline in profit.
The continuous integration layout deepens cost advantages and increases market share. The company's self-supply ratio of core raw materials continues to increase. 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%. The market share and profit level of electrolyte products maintained a leading position in the industry. The domestic market share of the company's electrolytes increased to 36.4% in 2023. Against the backdrop of continued intensification of competition in the industry, backward production capacity will gradually be cleared. As a leading enterprise, the company has mastered core technology, has large production capacity, and is deeply tied to leading downstream customers. The market share of the industry is expected to increase further after the industry clears up.
The overseas production capacity layout will be accelerated, and the focus will be on developing overseas customers in 2024. The company continues to expand its overseas production capacity layout. In 2023, the German OEM factory will be put into operation, and construction of the US electrolyte project continues to advance. A sample room will be set up in South Korea to support LGES, SDI and other customers, and it is planned to promote integrated overseas production capacity construction through the establishment of a subsidiary in Morocco. In 2024, we will focus on developing European, American, and Korean customers, including Tesla and LGES. The future expansion of overseas markets will help the company stabilize and increase its market share.
Keep up with cutting-edge technology in battery materials and focus on new product research and development. In order to meet the demand for high-performance batteries, the company will focus on promoting LiFSi's electrolyte formulation products and solutions in 2024. With 4C fast charging and the rapid discharge of 4680 large cylindrical batteries, the addition ratio and usage of LiFSi is expected to increase rapidly. In addition, the company's semi-solid electrolytes, all solid electrolytes of oxides and sulfides are in the pilot phase to cope with the advent of the solid-state battery era.
Investment advice: Maintain an increase in holdings rating. The company's 2024-2026 EPS is expected to be 0.79 yuan, 1.01 yuan, and 1.19 yuan respectively, and the corresponding PE is 31 times, 24 times, and 21 times, respectively. The company's integrated layout creates a cost advantage. Clearing backward production capacity is conducive to increasing the market share of leading enterprises. Performance is expected to gradually improve, and the rating of increasing holdings is maintained.
Risk warning: Risk of downstream demand falling short of expectations; increased risk of market competition; risk of battery technology iteration; risk of large fluctuations in raw material prices.