Key points of investment
Incident: Xingyuan Materials disclosed the 2023 Annual Report and 2024 Quarterly Report.
23Q4 performance was under pressure, mainly affected by product price cuts and the company's large one-time expenses. In 2023, the company achieved revenue of 3,013 billion yuan, +4.62% year-on-year; realized net profit of 576 million yuan, -19.87% year-on-year; and realized net profit of 545 million yuan, or -20.20% year-on-year.
Among them, 2023Q4, the company's revenue was 803 million yuan, -6% month-on-month; realized net profit attributable to mother of -901 million yuan, which turned loss year-on-month; realized net profit deducted from non-mother of -0.29 million yuan, and realized year-on-month loss. The main reasons why the fourth quarter's results fell short of expectations include a decline in gross margin due to a drop in product sales prices, accruing asset impairment losses of nearly 30 million yuan in the fourth quarter, and costs of tens of millions of yuan in the fourth quarter, such as litigation costs that were confirmed and the termination of the Celgard lawsuit.
Net profit for 24Q1 was about 100 million yuan. With 2024Q1, the company achieved revenue of 715 million yuan, +7.51% year over year; achieved net profit of 107 million yuan, or -41.45% year over year; realized net profit without deducted mother of 97 million yuan, or -39.66% year on year.
Net profit of a single flat in 2023 was about 0.2 yuan. In 2023, the company sold about 2.53 billion square meters of diaphragms, an increase of 48% over the previous year. In 2023, the company's comprehensive gross profit margin was 44.42%, -1.15pcts year on year; 2023Q4/2024Q1, the company's gross margin in a single quarter was 38.30%/35.99%, respectively. Product price cuts put pressure on gross margin. In 2023, the company's net profit was about 0.22 yuan, of which the basic balance of profit and loss for the fourth quarter was added after a one-time large fee was added. As the company's capacity utilization rate increases and the company's new production line is put into use, we expect the company's unit profit to improve.
We cooperate deeply with major overseas customers to provide effective support for the company's shipments with long-term large orders.
The company signed a “Strategic Memorandum” with Samsung SDI to supply about 2.22 billion flat wet coated diaphragms to Samsung SDI and jointly explore future business possibilities in North America; signed a “Global Strategic Cooperation Memorandum” with LG to prioritize procurement of company diaphragms in overseas markets, and jointly establish a global cooperation framework for purchasing no less than 12 billion square meters of diaphragms from 2024-2030.
Profit forecasting and valuation
We expect the company's 2024-2026 revenue to be 42.53/49.90/6.311 billion yuan, up 41.13%/17.35%/26.46% year on year; net profit to mother is 6.91/8.48/1,2007 billion yuan, up 19.86%/22.68%/42.44% year on year; corresponding PE is 20.23/16.49/11.58 times, respectively, giving a “gain” rating.
Risk warning:
Downstream demand falls short of expectations; market competition increases risk; risk of domestic and foreign policy changes.