Changes in customer structure dragged down profitability, and net profit to mother declined year-on-year
The company achieved revenue of 1,517 billion yuan in 24Q1, -67.67% year over year, net profit to mother of 110 million yuan, -74.36% year over year, net profit after deducting non-return to mother 104 million yuan, or -75.49% year over year. It is estimated that the decline in the share of overseas customers dragged down profitability. We maintain our profit forecast. We expect the company's net profit to be 975/11.00/1,421 million yuan in 24-26. Referring to the company's 24-year Wind's consistent average PE 17 times, considering the company's leading technical layout for new products such as solid-state battery cathode materials, the company was given 27 times the target PE for 24 years, corresponding to a target price of 51.96 yuan (previous value of 46.18 yuan), and maintain the “gain” rating.
1Q24 Profitability declined year-on-year
The sharp drop in the price of raw materials such as lithium carbonate led to a decrease in the unit price of cathode materials. Combined with weak downstream demand, which dragged down shipments, the company's Q1 revenue fell 67.67% year on year. The 1Q24 company achieved a gross profit margin of 14.89%, -1.55/-2.12pct, net profit margin 7.01%, and -2.17/-9.56pct month-on-month. The year-on-month decline in profitability is mainly due to weak demand from overseas customers with good profitability and a decline in share. The cost ratio for the 24Q1 period was 7.16%, compared to +2.65pct. Among them, sales, management, R&D, and finance expenses were +0.27pct, +2.50pct, and -2.23pct, respectively. The increase in the management cost ratio was mainly due to the Panzhihua base being put into operation, and the payment of consulting fees related to the European New Material Base project. The increase in the R&D cost ratio was mainly due to a decrease in revenue and failure to effectively dilute expenses.
The customer structure is excellent, and profitability is still at the forefront of the industry
The company's products support high-end car companies at home and abroad, and are shipped in batches to power battery companies with overseas first-tier brands such as SK ON, AESC, LG New Energy, and Murata. Domestic high-end power battery customers also maintain their position as the main supplier, and high-nickel products continue to be sold by overseas customers. Although the company's profitability has declined since this year due to declining demand from overseas customers, it is still at the leading level in the industry. We expect the company's balanced and high-quality customer structure to maintain the company's relatively stable profitability.
Solid-state batteries were the first to be mass-produced, and production capacity is progressing steadily
The company actively lays out new products. Ultra high nickel products have been used in 4680 large cylindrical batteries; lithium manganese iron phosphate has shipped in batches to first-class domestic battery customers; leading the layout of solid state ultra-high nickel materials, with cumulative shipments of hundreds of tons over 23 years, continuously increasing the supply share of solid-state battery customers such as Qingtao, Huineng, Weilan, Ganfeng Lithium, etc., and successfully used in solid state models of global first-tier car companies such as SAIC Motor Group and Vietnam VinFast; sodium cathodes have achieved hundreds of tons of deliveries to many overseas customers in 23 years. The company's production capacity is progressing steadily. The Panzhihua lithium phosphate (manganese) iron and iron project has a master plan of 300,000 tons; part of the production line with a production capacity of 40,000 tons in the first phase of the first phase of the first phase has been installed and is undergoing commissioning; the 60,000-ton high-nickel multi-material project of the first phase of the Europe-Finland project has entered the implementation stage.
Risk warning: Global sales of new energy vehicles fell short of expectations; the company's customer development progress fell short of expectations; increased industry competition caused the company's profitability to fall short of expectations.