Brief performance review
On April 24, '24, the company announced quarterly financial reports for '23 and 1Q24, 1) 23A: The company achieved revenue of $12.04 billion, YoY -4%; realized net profit deducted of $2.46 billion, YoY -36%.
Among them, Q4 achieved revenue of 2.95 billion yuan, YOY/QoQ -11%/-16%; realized deduction of non-net profit of 410 million yuan, and YOY/QoQ -44%/-43%. 2) 1Q24: The company achieved revenue of 2.33 billion yuan, YOY/QoQ -9%/-21%; realized deducted non-net profit of 150 million yuan, YoY/QoQ -76%/-63%.
The performance was in line with expectations.
Management analysis
1. Shipments have maintained a high increase, and performance is about to pick up.
1) Volume: The company's 23A, 4Q23, and 1Q24 are expected to ship 49.0, 12.5, and 1.25 billion square meters, YoY is +5%/4%/25% respectively, of which 4Q23 and 1q24QoQ are -17%/flat; the calculation only takes into account the shipment of A products. Note the difference with the total caliber of A+B products in the financial report, and the contribution of product B is basically negligible). Q1 The off-season was strong, and the company's shipments maintained steady growth; the capacity utilization rate reached 83% in '23.
2) Profit: The company's net profit for 23A, 4Q23, and 1Q24 is expected to be 0.55-0.60, 0.35-0.40, 0.20-0.25 yuan/square, YoY is -32%/-45%/-75%, of which 4Q23 and 1q24QoQ are respectively -31%/-38%. The estimates all take into account the return of quarterly equity incentives, bonuses, and minority shareholders' rights. The pressure on corporate profits is mainly due to falling prices in the mismatch between supply and demand.
2. Q2 and 24-year outlook: 23A diaphragm oversupply & inventory are at a high level. The industry's average production schedule growth rate lags significantly behind batteries. The current diaphragm inventory bottomed out. The overall battery/diaphragm production schedule increased 9.4%/13.8% respectively in April, and the company's environment increased by 12.2%; shipments are expected to be 15-17, 70-80 billion square meters in Q2/24. Up to now, it was previously claimed that the new diaphragm entrant products are still not circulating in the market, and IPOs have been terminated one after another. The overall production schedule and capacity utilization rate of the industry are expected to pick up, and the company's profit is expected to recover during the year.
Profit Forecasts, Valuations, and Ratings
We revised “the 24-year capacity utilization rate bottomed out” to “the 24-year capacity utilization rate increased quarterly”. According to the battery investment clock, the corresponding sector is a systematic market. The diaphragm is still one of the best barriers and patterns of lithium battery materials. The company is a global leader in diaphragms. The net profit to be returned to mother is estimated at 3.1 billion yuan and 3.5 billion yuan in 24 and 25, respectively, corresponding to PE 12 and 10X, respectively. Maintain a “buy” rating.
Risk warning
Sales of new energy vehicles fell short of expectations, increased competition in the industry, etc.