Incidents:
The company published its quarterly report for '24. In 1Q24, the company achieved revenue of 2,549 billion yuan, +7.2% year-on-year, and achieved net profit of 10 billion yuan, +107.1% year-on-year, gross profit margin of 24.66%, and net profit margin of -1.43%.
Comment:
In the traditional low season of consumer electronics in 1Q24, the company's gross margin declined slightly from month to month. In 1Q24, the company achieved revenue of 2,549 billion yuan, +7.2% year over month, -12.3%; net profit to mother of 0.1 billion yuan, +107.1% year on month; gross profit margin of 24.66%, +6.0 pcts year on year, -1.8 pcts month on month. The company's gross margin declined slightly from month to month, mainly due to the low season of consumer electronics demand in Q1, and the company's consumer battery capacity utilization rate decreased; net profit margin -1.43%, +5.4 pcts year over month, and -1.6 pcts month-on-month. The decline in net interest rate was mainly due to the increase in R&D expenses and asset rates Decrease Impact of loss of value; the company's cost rate for the period was 26.9%, -0.1 pct. Among them, R&D expense rate/ management expense rate/ sales expense rate/ financial expense ratio were 13.1%/12.7%/0.5%/0.6%, respectively, +1.3pcts/-0.1pcts/+0.1pcts/-1.4pcts month-on-month, respectively.
Consumer electronics gradually recovered in 1Q24, and demand for downstream terminals is expected to remain high throughout the year. 1) Mobile phone market: According to Canalys, global smartphone shipments reached 300 million units in 1Q24, an increase of 11%. Currently, the flagship products of major mobile phone manufacturers are introducing AI functions and services one after another, and mobile phone updates are expected to accelerate; 2) Laptop market: According to Canalys, 1Q24, global notebook shipments reached 45.1 million units, an increase of 4%. Benefiting from Windows 11 switching demand and the widespread introduction of new AI PC models, the PC market is expected to grow at an accelerated pace in 24 years. 3) Company side: The company is at the leading level in the global notebook cell and mobile phone battery field. According to Techno Systems Research, in '23, the company's global market share of lithium batteries for laptop products was 31.1%, ranking second in the world; the company's global smartphone lithium battery market share was 8.18%, ranking fifth in the world. Looking ahead to 24 years, benefiting from the industry's continued recovery in consumer electronics, the company's consumer business revenue is expected to grow rapidly.
The cost scale effect is expected to be seen every quarter, and starting and stopping batteries has become a new highlight in the dynamic storage business in '24. In '23, the company increased management investment and R&D investment, striving to improve operational efficiency and core technology competitiveness, and the management cost rate and R&D cost rate have increased. Looking ahead to 24 years, the company's operating system is becoming more efficient, the R&D system is becoming more and more perfect, and the company's cost ratio is expected to decrease quarterly as the scale of revenue continues to expand. In the mobile storage sector, the company has successively obtained fixed-term letters for various model projects from well-known domestic and foreign car companies such as SAIC, Zhiji, and Jaguar Land Rover. In April '24, according to the company's announcement, the company was designated by Stellantis to develop and supply 12V automotive low-voltage lithium batteries. The project will be mass-produced in 2026. Large-scale shipments of the company can be expected to start and stop batteries in '24, and it is expected to become the main source of revenue for the mobile storage business.
Investment analysis opinion: Considering the recovery of the consumer electronics market and the gradual effects of the company's mobile and storage business scale, we maintained the company's net profit to mother of 8.20/11.41/1,327 billion yuan in 24-26, corresponding to the closing price of April 23, PE 16/12/10 times. We believe that profits from the company's consumer business are rising steadily, and the scale effect of the mobile storage business is expected to gradually become apparent. Therefore, maintain a “buy” rating.
Risk warning: the risk of raw material price fluctuations, downstream demand falling short of expectations, and capacity release falling short of expectations.