Event: The company publishes its 2023 annual report. During the reporting period, the company achieved operating income of 10.511 billion yuan, an increase of 21.47%; net profit to mother of 1,201 billion yuan, an increase of 33.47%; realized net profit after deduction of 1,158 billion yuan, an increase of 37.12% over the previous year; and net cash flow from operating activities was 748 million yuan, an increase of 70.78% year on year.
Downstream has maintained its prosperity, and its performance has grown steadily. In terms of profitability, the company's gross sales margin during the reporting period was 23.58%, -0.28pct year on year; net sales margin was 11.59%, +1.04pct year on year. Overall, excluding the effects of value-added tax deductions and impairment reversals of advanced manufacturing enterprises, profitability remained stable. In the future, as the company's cost control, yield and efficiency improvements, the increase in overseas customer orders, and the release of production capacity from overseas bases and the continuous launch of new products, optimizing the product structure is expected to further optimize the company's profit structure and maintain a stable profit margin.
In terms of downstream demand, according to the “White Paper on the Development of China's New Energy Vehicle Industry (2024)”, global NEV sales reached 14.653 million units in 2023, an increase of 35.4% over the previous year. Domestically, according to data released by the China Association of Automobile Manufacturers, production and sales of new energy vehicles reached 9.587 million units and 9.495 million units, respectively, up 35.8% and 37.9% year-on-year, respectively, with a market share of 31.6%. The growth of the NEV industry has effectively driven the continued development of the power battery industry. According to the 2023 global power battery loading data released by SNE Research, the global power battery loading volume in 2023 was about 705.5 GWh, an increase of 38.6% over the previous year. In this context, the company's sales volume in 2023 was 3,737 million units, +3.46% year on year; production volume was 3.726 billion units, +2.07% year over year; inventory volume was 235 million units, -4.63% year over year.
Accelerate production capacity construction and enhance core competitiveness. The company has 13 production bases for precision structural components of power batteries and 3 production bases in Europe in key regions of the domestic lithium battery industry, such as East China, South China, Central China, Northeast China, Southwest China, and Northwest China. On January 6, 2024, the company announced that it plans to use no more than 1.2 billion yuan to invest in the construction of the “Shenzhen New Energy Battery Precision Structural Parts Production Base Project” in Longhua District, Shenzhen, which will achieve an annual output value of about 3.3 billion yuan after delivery. Overseas, the company used self-financing to increase the capital of Kodali in Germany by 30 million euros and to Hungary by 32 million euros. Currently, the German production base and Swedish production base of the company's 3 overseas production bases are in the trial production stage for supporting customers; the first phase of production at the Hungarian production base has reached full production, and the second phase of equipment is still in place. This will further expand the production capacity of overseas production bases and meet customer production capacity support needs. Overall, with the gradual completion and commissioning of the company's new production base, it will further increase the production scale of the company's precision structural parts for power batteries, improve production efficiency, reduce production costs, and help the company take an advantageous position in market competition and increase its market share.
Investment advice: Benefiting from factors such as the continued high level of prosperity in the downstream NEV market, the company's expansion of production capacity, and the possibility of large-scale mass production of 4680 batteries, the company's performance is expected to continue to increase. Therefore, the “Overweight” rating is maintained. The estimated net profit from 2024 to 2026 will be 1,396 billion yuan, 1,713 billion yuan, and 2,036 billion yuan, respectively; the corresponding PE is 17 times, 14 times, and 12 times, respectively.
Risk warning: downstream market demand falls short of expectations; production capacity release falls short of expectations; promotion of industries such as 4680 falls short of expectations; risk of worsening market competition; there is a risk that some statistics will be omitted, and there is a risk that various forecast parameters, assumptions, etc. fall short of expectations.