Investment events
The company released its 2023 annual report. In 2023, it achieved operating income of 11.446 billion yuan, up 4.29% year on year; net profit to mother was 344 million yuan, up 278% year on year; net profit after deducting non-return to mother was 231 million yuan, up 1170.55% year on year; plans to distribute 2.7 yuan (tax included) for every 10 shares, with a total estimated cash payment of 301 million yuan.
Key points of investment
Gross margin was relatively stable in the fourth quarter, and the management and R&D expense ratio increased in the fourth quarter of 2023, the company's revenue was 2.905 billion yuan, up 10.19% year on year; net profit to mother was 55 million yuan, up 794% year on year; and gross profit margin was 26.42%, which remained relatively high. On the cost side, the company's management and R&D expenses rates in 2023 were 11.04% and 10.05%, respectively, up 3.83 and 3.01 percentage points year over year.
Consumer batteries: Profits continued to improve. In 2023, the self-supply rate of Pack increased dramatically. In 2023, the company achieved operating income of 10.48 billion yuan, an increase of 4.13% over the previous year, and a gross profit margin of 27.60%, an increase of 8.98 percentage points over the previous year. We believe it mainly benefited from factors such as falling raw material market prices, continuous promotion of fine management to improve production and operation efficiency, and an increase in the exchange rate of the US dollar against the RMB. According to Techno Systems Research data, the company's share of lithium batteries for laptops and tablets and lithium batteries for smartphones reached 31.10% and 8.18% respectively, ranking second and fifth in the world, respectively. The share of consumer battery packs supplied by the company increased to 35.44%, an increase of 7 percentage points over the previous year.
Power energy storage batteries: The gross margin was greatly improved. It was designated by Stellantis Low Voltage Battery in 2023. The company achieved operating income of 548 million yuan, an increase of 37.92% over the previous year, and a gross profit margin of -15.05%, an increase of 15.79 percentage points over the previous year. The scale effect continues to be reflected. According to the company's annual report for the year 23, Zhejiang Guanyu subsidiary, the company's power and energy storage battery executive, lost 628 million yuan. In the start-stop battery sector, the company has successively been recognized by many well-known domestic and foreign car companies such as SAIC, Zhiji, and Jaguar Land Rover, and has received fixed-term letters for several model projects. Bulk shipments of automotive low-voltage lithium battery products will begin in 2023, and it is expected that 2024 will usher in large-scale market volume. In early April 2024, the company was appointed by Stellantis to develop and supply 12V automotive low-voltage lithium batteries. According to its demand plan, the project will be mass-produced in 2026.
Profit forecasting and valuation
The profit forecast was lowered and the “increase in holdings” rating was maintained. The company is a leader in the consumer battery industry, and continues to release low-voltage start-stop batteries. Based on factors such as industry demand falling short of expectations, we carefully downgraded the company's 2024-2025 net profit to 826 million yuan and 1,158 million yuan respectively (976 million yuan and 1,482 million yuan before the reduction, respectively), and added the 2026 forecast to be 1,434 million yuan, corresponding EPS was 0.74, 1.03, and 1.28 yuan/share, respectively. The corresponding PE was 17, 12, and 10 times, respectively, to maintain the “gain” rating.
Risk warning
Customer order demand falls short of expectations, raw material prices fluctuate greatly, and market competition intensifies.