1Q24 results are in line with our expectations
The company announced its 2023 results: revenue of 11.446 billion yuan, up 4.29% year on year; net profit to mother of 344 million yuan, up 278.45% year on year; deducted non-net profit of 231 million yuan (18.25 million yuan after deducting non-net profit in 2022). The 2023 results are largely in line with previous performance reports and our expectations. The company announced that it plans to pay a cash dividend of 0.27 yuan (tax included) per share in 2023.
At the same time, 1Q24 results were announced: revenue of 2,549 billion yuan, up 7.23% year on year; net profit attributable to mother of 9.996 million yuan (same period last year - 140 million yuan); deducted non-net profit - 16.31 million yuan (same period last year - 166 million yuan). The company's 1Q24 results met our expectations.
Development trends
Consumer batteries bucked the trend, and the PACK self-supply rate continued to rise. Consumer battery revenue in 2023 increased 4.13% year on year to 10.480 billion yuan, including laptop revenue of 6.611 billion yuan, up 1.04% year on year; mobile phone revenue was 3.428 billion yuan, up 12.44% year on year. Against the backdrop of sluggish demand for consumer electronics, the company's laptop and mobile phone revenue bucked the trend, ranking second and fifth in the world in terms of shipment volume. Furthermore, the company said that in 2023, the self-supply ratio of consumer cell packs increased by 7.0ppt to 35.44% year-on-year. In terms of gross margin, the gross margin of consumer batteries increased by 8.98ppt to 27.60% year-on-year in 2023. We judge that it is mainly due to factors such as a decrease in raw material prices and an increase in production capacity utilization due to increased shipment volume.
Power energy storage performance was sluggish, and the customer base started to expand steadily. In 2023, power energy storage revenue increased 37.92% year-on-year to 548 million yuan. We judge that mainly start-stop batteries are growing well, and the company announcement has been targeted by many car companies such as SAIC/Zhiji/Jaguar Land Rover. In terms of gross margin, due to the high price of raw materials and the climbing phase of power production lines, the gross margin of power energy storage was -15.05%, causing a certain drag.
Revenue rose steadily in 1Q24, and expenses and asset impairment dragged down profits. 1Q24's revenue increased 7.23% year on year. We judge that it was mainly due to consumer batteries growing against the trend year on year; gross margin increased by 6.0 ppt to 24.7% year on year. We judge that the main reason was the reduction in raw material prices combined with increased capacity utilization, which led to the restoration of gross margin of consumer batteries. Furthermore, 1Q24 R&D expenses increased 53.6% year over year to 334 million yuan, and calculated asset and credit impairment losses amounted to 54.49 million yuan, causing a certain drag on performance. Looking forward to the future, we are optimistic that the company's profits will improve quarterly as consumer electronics enter the peak season and start and stop orders will gradually contribute revenue.
Profit forecasting and valuation
Considering losses in the power business, we lowered our 2024/2025 net profit by 35.8%/27.5% to 601 million yuan/993 million yuan. The current stock price is 22.9 times/13.9 times the price-earnings ratio for 2024/2025. Maintaining an outperforming industry rating and considering the power business loss reduction process, we lowered our target price by 28.6% to 15.0 yuan, corresponding to 28.0 times/16.9 times the 2024/2025 price-earnings ratio, with 22.2% room for growth.
risks
Demand for consumer batteries is low, the power and energy storage business continues to lose money, and there is a risk that raw material prices will rise.