Incident: Ningde Times released its 2024 quarterly report. In 24Q1, revenue was 79.77 billion yuan, down 10.41% year on year; net profit to mother was 10.51 billion yuan, up 7% year on year. The company's performance exceeded expectations.
Q1 Shipment volume increased, inventory management was effective, and cash flow was strong. Q1's battery sales volume is about 95 GWh, and battery sales increased by more than 25% over the same period, with energy storage accounting for nearly 20%. The company's production capacity utilization rate in the first quarter was higher than in the same period in '23. Driven by the automobile trade-in policy, shipments are expected to increase rapidly in 24. The company's inventory management effect was remarkable, and the price reduction of raw materials saved cash flow expenses on the procurement side. The net cash flow from 24Q1 operating activities was 28.358 billion yuan, an increase of 32.25% over the previous year, far higher than the revenue and profit growth rate. At the end of the first quarter, monetary capital was 288.6 billion yuan, and capital reserves were abundant.
24Q1 profitability continues to improve and is expected to be maintained. The 24Q1 gross profit margin was 26.42%, up 0.75 pcts month on month, up 5.15 pcts year on year; net profit margin was 14.03%, up 0.63 pcts month on month, up 2.71 pcts year on year. Other revenue for 24Q1 was $3.2 billion, of which government subsidies were about $1.8 billion; most of the others benefited from preferential tax policies for advanced manufacturing industries, which will be confirmed over time and are sustainable. Based on the price linkage mechanism, the profitability of the company's units is expected to remain stable.
Shenxing Battery's customer base continues to expand, and condensed batteries can be used to electrify flying vehicles. In '23, the company released condensed batteries and ultra-fast charging Shenxing batteries. Sodium-ion batteries and M3P batteries were mass-produced on Chery models. Kirin batteries, which peaked at 5C fast charging, achieved mass production with ideal cooperation, and 4C Shenxing fast charging batteries were widely favored by customers. The condensed state batteries released by the company can be used for the electrification of civil aircraft.
The market share continues to increase, and the brand effect helps overseas expansion. According to SNE statistics, in January-January 2024, the company's global power battery market share was 38.4%, an increase of 5 percentage points over the previous year; according to the Power Battery Alliance data, the company's domestic power battery market share was 48.9% from January to January 2024, an increase of 4 percentage points over the previous year. As the “circle of friends” of Fast Charging and Kirin Battery launched in the second half of the year 23 of the Ningde Era continued to expand, the LRS asset-light model developed overseas customers, and “CATL Inside” further seized consumers' mentality about the quality of power batteries and helped the company achieve a leap from leading manufacturing companies to establish a brand effect on the ToC side.
The company will focus on overseas project construction in the future, and the German plant expects a 24-year break-even balance.
Profit forecast, valuation and rating: As demand for power batteries is expected to exceed expectations, the company's profitability remains stable. The company's net profit forecast for 24-26 was raised to 504/603/71.5 billion yuan (up 11%, 6%, 5%). The current stock price corresponds to PE of 17/14/12X. The company continues to increase its market share with technical advantages, customer advantages, scale advantages, etc., and overseas cooperative asset-light models such as LRS reduce the leverage ratio. The brand effect further enhances the bargaining power of the industrial chain, and the net interest rate is expected to increase, thereby maintaining a high level of ROE and achieving a leap forward in new growth. PE valuation has reached the bottom of history, maintaining a “buy” rating.
Risk warning: NEV sales fall short of expectations, demand for energy storage falls short of expectations, overseas policy risks.