1Q24 Results Exceed Market Expectations
The company achieved revenue of 79.77 billion yuan in 1Q24, a decrease of 10.4%/24.9%, and net profit of 10.51 billion yuan, a net profit of 10.51 billion yuan, a year-on-year increase of 7%, a decrease of 19.0%, after deducting non-profit of 9.25 billion yuan, an increase of 18.6% and a decrease of 29.4%. Benefiting from the price reduction of raw materials and the value-added tax deduction policy, the company's 1Q24 performance exceeded market expectations.
Development trends
Shipments in the lithium battery business grew steadily, and gross margin increased further. We estimate that the company actually shipped 1Q24 lithium batteries by about 95 GWh, an increase of 18-19%. Of these, power/energy storage batteries were shipped 76/19 GWh, benefiting from industry growth and increased company share, and the company's lithium battery shipments maintained a high growth trend; we estimated that the average sales price of power batteries was about 0.74 yuan/Wh, and the average price storage price was 0.78 yuan/Wh, down about 3-4% month-on-month. The 1Q24 price reduction was manageable. In terms of profitability, we estimate that the gross margin of 1Q24 power batteries is about 26% + and the gross profit margin of energy storage batteries is 27% +, which increased further from month to month, but due to price cuts and higher rates, unit net profit declined month-on-month. We estimate that the net profit per unit (after tax) of 1Q lithium batteries was about 0.075 yuan (after tax), a 3-4 percent drop, and the corresponding profit contribution was about 7 billion yuan +.
Expense rates have increased, VAT deduction policies have increased profits, and cash flow performance is strong. The company's 1Q24 sales/management/finance/R&D expense ratio changed by +0.97pp/+0.92pp/+0.22ppt, respectively, and the cost investment increased; in addition, the company's 1Q24 other revenue was 3.21 billion yuan, a significant increase over the same period, of which government subsidies were about 1.8 billion yuan. The remaining 1.4 billion yuan was mainly VAT deduction and refund. According to the Ministry of Finance's September 2023 policy 1, advanced manufacturing is allowed from January 1, 2023 to December 31, 2027. The enterprise deducts the amount of VAT payable by 5% according to the current deductible input tax amount. 1Q's operating cash flow was 28.36 billion yuan, an increase of 35.3% over the same period. The cash flow performance was strong.
Looking ahead to 2Q24, we believe that demand for downstream new energy vehicles and energy storage is expected to continue to improve month-on-month. The initial production schedule in the April-May industry chain continues to exceed expectations, and several material links such as 6F, copper foil, and diaphragms have recently begun to rise, which is expected to support 2Q24 battery prices; we expect that the company's lithium battery price reduction will be limited, and the company's 2Q lithium battery unit profit is expected to improve.
Profit forecasting and valuation
Considering that the value-added tax deduction policy has a certain degree of continuity in profit growth, and that the price reduction was better than expected due to the company's excessive accrual sales rebate in the early period, we raised our 2024/2025 profit forecast 11%/15% to 513.7/6418 billion yuan, and the target price was 9.3% to 235 yuan. The current stock price corresponds to 2024/2025 16.9x/13.5x P/E, and the target price corresponds to 2024/2025 20.1x/16.1xp/e, with 19.2% upward room to maintain the industry rating. .
risks
Global demand for new energy vehicles fell short of expectations, global demand for energy storage fell short of expectations, and raw materials fluctuated greatly.