Incident: The company released its 2023 annual report, achieving full year revenue of 10.511 billion yuan, +21.47% year on year; net profit to mother of 1,201 billion yuan, +33.47% year over year; net profit after deduction of 1,158 billion yuan, +37.12% year over year. Looking at Q4 alone, the company achieved revenue of 2,743 billion yuan, +2.22% year over year; net profit to mother of 406 million yuan, +31.91% year over year; net profit after deduction of 3.861 billion yuan, +33.77% year over year. The company's overseas business expansion opens up profit space, and economies of scale are beginning to show optimal cost rates during the period.
During the optimization period, cost rates increase profits, and continue to promote high-end products. In 2023, the company realized expenses of 1,047 billion yuan, with a period cost ratio of 9.96%, a year-on-year rate of -0.37pct. The decrease in the period expense ratio was mainly due to the company's optimization of financial expenses and an increase in interest income during the reporting period. During this period, the company strengthened its high-end market positioning, deepened its big customer strategy, and secured 350 million square battery cover orders with well-known European lithium battery manufacturers.
In 2023, the company sold 3.74 billion metal structural parts, achieving revenue of 10.50 billion yuan and gross profit of 2,473 billion yuan, corresponding to an average sales price of 2.81 yuan/piece, gross profit of 0.66 yuan/piece. The company's average sales price in 2022 was 2.39 yuan/piece, gross profit 0.57 yuan/unit. Locking in large orders for high-end products will help the company broaden its profit margin.
Equity financing increases investment in production capacity, and economies of scale are expected to show after the new production capacity is put into operation. In July '23, the company completed a fixed increase of 3,510 billion yuan to build production capacity for precision structural parts of NEV power batteries. During the reporting period, the company laid out 13 domestic production bases for precision structural components of power batteries and 3 overseas production bases in Germany, Sweden and Hungary. Throughout the year, the company completed the Huizhou Phase III project, the Hubei plant project, the Jiangsu Phase III plant project, and the Hungarian plant renovation project were basically completed or put into operation. During the reporting period, the company increased capital of 30 million and 32 million euros to Germany's Kodali and Hungary's Kodali respectively to strengthen production line construction. We believe that the company's overseas output space in 2024 is 1.2 billion yuan, which is estimated to increase revenue by 900 million yuan based on a 75% performance contribution. The company's new production capacity has been put into operation one after another, and the effect of increasing the overseas share of the company's size is further evident, and profit flexibility is expected to increase.
Increase investment in R&D to ensure core competitiveness. In 2023, the company invested 636 million yuan in R&D, an increase of 16.75% over the previous year. It continued to make breakthroughs in improving the safety, reliability, capacity space, weight reduction, and production cost reduction of precision structural parts of power batteries. During the reporting period, the company added 66 new patents, an increase of 19.24% over the previous year. At the same time, the company cooperates with leading global battery manufacturers to carry out cooperative research and development with customers, strengthen the integration of customer supply chain systems, and continue to improve core competitiveness such as brand effects.
Investment advice: We expect the company to achieve revenue of 130.92/159.33/18.934 billion yuan in 2024-2026, net profit to mother of 1,322/16.74/2.045 billion yuan respectively, EPS of 4.90/6.20/7.57 yuan, and PE of 18/14/12 times, for the first time coverage, giving it a “recommended” rating.
Risk warning: Demand for downstream power batteries falls short of expectations, overseas sales fall short of expectations, and industry competition intensifies.