Brief performance review
On April 22, 2024, the company disclosed its quarterly report. Q1 achieved revenue of 2.5 billion yuan, an increase of 7%; realized net profit to mother of 0.1 billion yuan to reverse losses; realized deducted non-net profit to mother of -16 million yuan, which is narrower than the loss for the same period last year (loss of 166 million yuan in Q1 in '23).
Management analysis
By product revenue, the company's consumer business revenue in 2023 was 10.5 billion yuan, an increase of 4% over the same period. Power energy storage revenue reached 400 million yuan, an increase of 190% over the same period.
In terms of profitability: 1) The company's gross margin reached 25% in 2023, up 8.3 pct from the same period last year. The sharp improvement in gross margin was mainly due to a sharp drop in the price of the raw material lithium cobalate. Among them, the gross margin for consumer products was 27.6%, up 9 pct from the same period last year; the gross margin for power energy storage was -15%, up 16 pcts from the same period last year. The company's net interest rate in 2023 was 3%, up 2.2 pct from the same period last year. The increase in net interest rate was lower than the increase in gross margin, mainly due to a sharp rise of 3.8 or 3 pcts in management rates and R&D rates. 2) The company's gross margin in Q1 2024 was 24.7%, up 6 pcts from the same period last year, but the decline continued for two quarters from month to month.
In 2023, the company's share of laptop and mobile phone batteries was 31% and 8%, ranking second and fifth. In 2023, global notebook and mobile phone shipments were 200 to 1.1 billion units. In 2023, the company achieved mass production of Apple phone battery products for the first time. It can be expected that the share of mobile phone batteries will increase in the future, and the company's consumer business is expected to grow steadily.
In the power energy storage business, the company focuses on the automotive low-voltage lithium battery and drone battery business. It has been recognized by many domestic and foreign first-line OEMs such as SAIC, Zhiji, and Jaguar Land Rover, and has received fixed points one after another. It is expected that along with starting and stopping battery volumes, the power energy storage business is expected to gradually reduce losses.
Profit Forecasts, Valuations, and Ratings
Considering that the company's power energy storage losses exceeded expectations, we lowered the company's net profit due to mother in 2024 and 2025 to 741 billion yuan (originally 1.48 billion yuan). The company's net profit due to mother is estimated to be 1.5 billion yuan in 2026. The current price of the company's stock corresponds to a PE valuation of 19, 14, and 9 times, maintaining a “buy” rating.
Risk warning
Risks such as weak demand in downstream markets; increased competition in the industry; fluctuations in raw material prices; reduction in shareholders' holdings; convertible bond projects falling short of expectations; lifting of the ban on restricted shares; and fluctuations in the RMB exchange rate.