Incident: The company released its 2023 annual report, achieving annual revenue of 3.01 billion yuan, an increase of 4.6% over the previous year; realized net profit of 580 million yuan, a year-on-year decrease of 19.9%. Looking at the fourth quarter of a year, the company achieved operating income of 80 million yuan, an increase of 1.9% over the previous year, and realized net profit of 90 million yuan to mother, a year-on-year decrease of 169.4%. At the same time, the 2024 quarterly report was released. The first quarter achieved operating income of 710 million yuan, an increase of 7.5% over the previous year, and realized net profit of 110 million yuan, a year-on-year decrease of 41.4%.
Shipments remained high in '23, making it difficult for profits to withstand the downward pressure on prices. In '23, the company's diaphragm sales reached 2.53 billion square meters, an increase of 48.5% over the previous year. However, the price of diaphragm continued to decline. The price of wet and dry base film dropped by about 8% to 20% in '23, and the price of coated film dropped by 18% to 23%. The 2024Q1 price reduction trend continued. By the end of the first quarter, the price of base film had dropped by more than 20% compared to the beginning of the year, and the price reduction of coating film was also 18-22%. The continuous decline in product prices has put some pressure on the company's profits. In '23, a single non-net profit deducted about 0.22 yuan, a year-on-year decrease of 46%.
There is limited room for price reduction in 24 years, and sales growth is expected to continue. Currently, diaphragm prices are in the bottom range, and there is limited room for further price reduction. The company is steadily promoting production capacity construction and investment at various production sites, while actively developing domestic and foreign customers, and continuing to deepen and accelerate stable business partnerships and product certification work with well-known foreign battery manufacturers. New projects and new production capacity are expected to drive the company's diaphragm sales to maintain a good growth trend in 24 years, further increasing the global market share.
New-generation wet production lines have been put into operation one after another, the global layout continues to improve, and the profit structure is expected to be further optimized. In '23, the company launched the fifth-generation super wet line. The equipment width exceeds 8 meters, the production capacity is 250 million square meters, and the production efficiency has set new industry standards. At the same time, the company has further implemented a global development strategy and carried out production capacity layout in Sweden and Malaysia to enhance localized supporting supply capabilities for major overseas customers. As new-generation wet production lines are gradually put into use and overseas bases are gradually built and put into operation, the company's share of wet diaphragms and overseas revenue is expected to increase, leading to further improvements in the profit structure.
We forecast the company's earnings per share for 2024-2026 to be 0.61, 0.83, and 0.99 yuan, respectively (the previous forecast values for 2024-2025 were 0.90 and 1.10 yuan, and the profit forecast was lowered mainly due to falling diaphragm prices). Combined with comparable company valuation levels in the industry, we believe that the current reasonable valuation level of the company is 23 times the price-earnings ratio of 2024, corresponding to a target price of 14.03 yuan, maintaining the purchase rating.
Risk warning
Demand for lithium batteries fell short of expectations; changes in power battery technology routes; product prices declined due to increased competition in the industry; changes in assumptions affected calculation results; the company's overseas projects fell short of expectations, etc.