incident. On April 17, 2024, the company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved revenue of 17.311 billion yuan, a year-on-year change of -39.79%, and realized net profit of 527 million yuan, a year-on-year change of -52.93%, after deducting net profit of 466 million yuan, a year-on-year change of -52.44%.

24Q1 performance. Revenue and net profit: The company's 2024Q1 revenue was 3.299 billion yuan, -8.02% year on month, -21.24% month on month, net profit to mother was 111 million yuan, -3.71% year on year, -3.28% month on month, net profit after deduction of 103 million yuan, +4.28% year on month. Gross profit margin: 2024Q1 gross margin was 7.60%, +0.24pct year over year, and -0.46pct month-on-month. Net interest rate: 2024Q1 net margin was 3.35%, +0.12pcts year over year and +0.57pcts month over month. Expense ratio: The company's expense ratio for the 2024Q1 period was 4.64%, -1.22pcts year over year. Among them, sales, management, R&D, and finance expenses were 0.24%, 1.21%, 2.64%, and 0.55%, respectively.

24Q1 sales increased rapidly, and the product matrix continued to be enriched. In '23, the company shipped 3.46, 3.74, and 0.37 million tons of lithium cobalt oxide, ternary materials, and hydrogen energy materials respectively, with year-on-year changes of +4.15%, -19.39%, and -7.66%.

24Q1's shipments of lithium cobalate and ternary materials reached 0.84 and 15,900 tons, an increase of 62.50% and 249.47% year-on-year. 1) Lithium cobalate: 4.5V lithium cobalate products have been mass-produced and supplied. 4.53V lithium cobalate has entered the testing stage. The sample performance is excellent, and it has passed new project certifications from several downstream customers; 2) Ternary materials: Ni8 series high-safety ternary material samples meet customer needs and are in the production line expansion and verification stage. Overseas vehicle manufacturer system certification for Ni9 series ultra-high nickel ternary materials is progressing smoothly. In addition, the company has developed high-power, high-voltage ternary products for the drone field, and has achieved mass production, with monthly sales reaching 100 tons and continuous growth; 3) Hydrogen energy materials: The company continues to promote technological innovation in hydrogen energy materials and phosphate materials. Third-generation vehicle hydrogen storage alloys have been steadily supplied to new hybrid models of internationally renowned car companies, and lithium iron phosphate solid-liquid mixing technology has passed customer project verification and is in the introduction stage.

The joint venture built a 40,000 ton ternary materials project in France to accelerate the development of overseas markets. In 2023, the company's overseas business achieved revenue of 1.02 billion yuan, a year-on-year increase of 48.05%, corresponding to a gross profit margin of 24.03%, which is 17.37pcts higher than the domestic 6.66%. On September 27, 2023, the company announced that it intends to establish a joint venture with its wholly-owned subsidiary European Xiatungsten New Energy and Orano CAM to build a 40,000 ton ternary material project in France. The project is being built in two phases, the first phase and 20,000 tons each. The first phase of production capacity is expected to be completed and trial production in 2025Q4, and the second phase is expected to be completed in 2027Q3. As European production capacity projects continue to advance, the company's share of overseas customers and profit levels will further increase.

Investment advice: We expect the company to achieve revenue of 231.04, 261.57, and 31.90 billion yuan in 2024-2026, with year-on-year growth rates of 33.5%, 13.2%, and 22.3%, net profit to mother of 7.64, 10.29, and 1,514 billion yuan, respectively. The year-on-year growth rates are 44.9%, 34.6%, and 47.2%, corresponding PE is 19, 14, and 9 times. Considering the company's continuous enrichment of the product matrix, the global production capacity layout will be deepened to maintain the “recommended” rating.

Risk warning: Upstream raw material prices fluctuated beyond expectations, overseas production capacity investment and construction were blocked, and industry competition further intensified.