Q4 results were in line with expectations, and Q1 earnings exceeded expectations. The company's 23 year revenue was 4.4 billion yuan, -8%; net profit to mother was 7.2 billion, same -44%, gross profit margin 28%, same decrease of 14 pcts, net profit of 16%, 10 pcts; of these, 23Q4 revenue was 1.2 billion, -2%/+1.3% YoY, net profit to mother 160 million, -36%/-5% YoY, gross profit margin 29%, -8.7pct/+0.9pct YoY. 24Q1 revenue of 870 million yuan, -9.6%, net profit to mother of 150 million, same -35%, gross profit margin 26.7%, same -8.4 pct, net profit margin 17.3%, same -7 pct.
Demand has clearly recovered since March, and shipments are expected to increase by 40% in '24. In '23, the company shipped 141,000 tons of anodes, an increase of 32%. Of these, Q4 shipped 46,000 tons, an increase of 66%, and an increase of 6%. The company is the largest supplier in Ningde, accounting for 61% of revenue in '23, the same as +4pct. We expect the company to ship nearly 35,000 tons of Q1 anodes, an increase of 40%. The company is the main supplier of Ningde Shenxing. Demand has clearly started in March, and full production has been achieved in April. Q2 shipments are expected to increase 50% + to 50,000 tons. We expect to ship 200,000 tons for the whole year of '24, an increase of 40%. Production capacity of 100,000 tons will be added by the end of '24, and shipments are expected to maintain a 30% growth rate in '25.
Q1 Unit profit exceeded expectations, and the unit profit for the whole year is expected to remain at 0.35,000/ton. The unit price of the company's anode was 310,000 yuan/ton (tax included) in '23, down 31% from the same period. According to 24Q1, the unit price was about 29,500 yuan/ton, a 2% drop. On the profit side, net profit of the negative electrode ton in '23 was 0.5 million yuan/ton, and the net profit of Q4 tons was 0.35 million yuan/ton, and the net profit per ton in 24Q1 was about 40,000 yuan/ton, of which impairment surged back to 0.17 million yuan. If net profit of 0.38 million yuan/ton was deducted, the ring fell 20% +. This is a reduction in the operating rate of Q1 combined with the negative electrode price reduction at the beginning of the year, but the company's profit is still significantly better than the industry average. Considering that the price reduction of the anode will be fully reflected in Q2. The profit for Q2 is expected to be 30,000 yuan/ton+, which is better than previous market expectations. Currently, the ultra-low price of the anode industry has risen slightly. The price bottom is clear. The company's cost advantage is obvious. The net profit of 24 tons is expected to be maintained at 0.35 million yuan.
Inventory was maintained at a reasonable level, and Q1 impairment losses were partially recovered. The cost for the 23-year period was 250 million yuan, the same -13.6%, the cost ratio was 5.7%, the same -0.4 pct, the deductible value was 80 million yuan, the 24Q1 period cost was 60 million yuan, the same +7%, the cost ratio was 6.9%, the same +1 pct, and the impairment loss was 17 million yuan. The company's net operating cash flow in '23 was 420 million yuan, down 48% from the same period. 24Q1 net operating cash flow of -260 million yuan, -59%; net cash flow from investment activities was 110 million yuan, up 250%; book cash was 100 million yuan, -93%; short-term loans were 800 million yuan, up 22% from the beginning of the year. Inventory at the end of 24Q1 was 1.15 billion, up 5% from the beginning of the year, and contract liabilities were 0.2 billion yuan, down 10% from the beginning of the year.
Profit forecast and investment rating: Considering the company's significant cost advantage, we raised 24-25 net profit to 7/9.4 (original forecast value was 6/870 million yuan), added a 26-year forecast of 1.27 billion yuan, -3%/+33%/+36% year-on-year, and gave 2024 20 times PE, corresponding to a target price of 53.8 yuan, maintaining the “buy” rating.
Risk warning: Fluctuating raw material prices and market competition increase risk.