Incident: The company released its quarterly report for the year 24. Q1 achieved revenue of 79.77 billion yuan, -10.4%/-24.9% year-on-month, and realized net profit of 10.51 billion yuan, +7%/-19.0% year-on-month, after deducting non-net profit of 9.25 billion yuan, +18.6%/-29.5% year-on-month. Single quarter gross profit margin 26.4%, YoY +5.2pct/+0.8pct, net profit margin 13.2%, YoY +2.1pct/1.0pct.
Battery sales increased year-on-year, and unit profit remained stable: the company sold 95 GWh in the first quarter, +27% year over year, and the corresponding non-net profit of a single flat deduction was 0.097 yuan/Wh, which was flat month-on-month, mainly due to supply chain control, scale effects, and strong manufacturing capacity. The cost rate for the 24Q1 period was 13.0%, +2.9 pct/+3.9 pct. Of these, R&D expenses decreased 6.7% year over year. The reason was that R&D expenses were mainly composed of material expenses, personnel expenses, equipment depreciation and amortization, etc., while material prices declined significantly year on year, leading to a slight year-on-year decline in R&D expenses in the first quarter. Sales and management expenses were +16.1% and +24.4%, respectively, mainly due to the expansion of business scale.
The growth rate of capital expenditure has slowed, inventories have declined slightly from month to month, and operating cash flow is strong: 1) 24Q1 capital expenditure was 7.1 billion yuan, -32.3%/+5.6% compared to the previous month. The future will focus on promoting overseas projects, and the domestic upgrade will be completed through supercables. As demand continues to grow, the company's capacity utilization rate is expected to increase, leading to a further increase in profits. 2) Inventory in 24Q1 was 44 billion yuan, a slight decrease of 3.2% over the previous month. The company's inventory has remained low for four consecutive quarters. Mainly, inventory management strategies have been implemented, and inventory utilization and turnover efficiency have improved markedly. 3) The 24Q1 company's net operating cash flow was 28.4 billion yuan, +35.3% over the same period. On the one hand, the company implemented a VMI inventory management model in '23, and inventory remained at a low level; on the other hand, it came from the decline in raw material prices on the purchasing side, leading to savings in cash flow expenses.
Market share continues to increase, and new products are rapidly exploding: According to statistics from the Power Battery Industry Innovation Alliance, the company's cumulative domestic installed capacity in January-March was 41.32 GWh, with a market share of 48.6%, +4.1pct compared to the previous year. Globally, according to SNE Research statistics, the company achieved 35.5 GWh of power batteries installed in January-January, with a year-on-year ratio of +44.9%, with a market share of +4.8pct to 38.4%, mainly due to the gradual implementation of targeted installations in Europe in the early years.
With the gradual implementation of highly competitive new products such as the Rock Skateboard Chassis, 5C Ultra Rechargeable Battery, Kirin Battery, and Shenxing Battery, the company's share is expected to increase further.
Investment advice: The company focuses on technology research and development, lays out a differentiated product matrix, continuously increases global market share, and maintains good profits in fierce market competition. We expect the company to achieve operating income of 4280.25/5276.45/586.630 billion yuan and net profit to mother of 471.84/560.96/62.322 billion yuan in 2024-2026, corresponding PE of 18.38/15.46/13.92 times, respectively, maintaining the “increase” rating.
Risk warning: risk of fluctuations in raw material prices; risk of replacement of new technology products; risk of policy change; risk of overcapacity.