Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 19.064 billion yuan, a year-on-year decrease of 11.76%; achieved net profit of 535 million yuan, a year-on-year decrease of 61.29%; realized net profit deducted from mother of 480 million yuan, a year-on-year decrease of 66.60%; and achieved an overall gross profit margin of 11.08%, down 5.10 Pct from 2022.
Incident reviews:
Affected by overseas demand for packaging foil, the company's annual performance was under pressure. In 2023, the company sold 632,600 tons of aluminum foil products, achieving revenue of 15.488 billion yuan, down 16.23% year on year, gross margin of 12.91%, down 4.76 Pct from 2022; selling 107,700 tons of aluminum strips, achieving revenue of 2.177 billion yuan, up 8.22% year on year, gross margin of 3.30%, down 4.29 pct from 2022. Among them, the decline in revenue and profitability of the company's aluminum foil products is mainly due to the decline in demand for packaging foil in overseas markets and the construction of overseas bases is still in the climbing stage. With the gradual commissioning of overseas bases and the gradual recovery of overseas demand, the packaging foil business is expected to recover.
The company's expenses were stable during the period, and net operating cash flow declined. In 2023, the company's expenses for the period were 1,352 million yuan, a year-on-year decrease of 12.04% compared to 2022. The rate for the period was 7.08%, a decrease of 0.03 pct compared to 2022, and remained stable overall. The net cash flow from the company's operating activities at the end of 2023 was $1,133 million, down 37.82% from 2022.
It has the highest market share in the country for three consecutive years, and the scale advantage is outstanding. From 2021 to 2023, the company ranked first in the country in terms of aluminum foil production, sales volume and market share. Among them, battery foil production, sales volume and market share ranked first in the country. With its scale advantage, on the one hand, the company has reduced the fixed cost per unit of the product and enhanced market competitiveness; on the other hand, during the scale expansion process, it has accumulated experience, greatly improved production efficiency and improved the company's rapid supply capacity through internal exploration of potential and technological transformation; at the same time, the scale advantage ensures that the company can adjust the product structure in a timely manner when the market environment changes, seize the development opportunities of new products, and seize the market first.
Continuing to improve the layout of overseas markets is expected to fully benefit from the high growth of overseas markets. The company is the first domestic aluminum foil company to complete overseas layout. It has built 5 production bases in Zhenjiang, Jiangsu, Hangzhou, Zhejiang, Tongliao, Inner Mongolia, and Thailand and Italy, countries along the “Belt and Road”. The company has aluminum foil plants in Italy and Thailand, and the Ningde Era has production capacity plans of 14 GWh in Germany and 100 GWh in Hungary. The company is expected to take the lead in supplying 114 GWh of European production capacity through overseas layout. Furthermore, the company has close cooperation with leading companies such as BYD and LG, and is expected to fully benefit from high growth in overseas markets, increase overseas and even global market share, and further consolidate the company's competitive advantage.
Investment advice:
Considering the decline in battery aluminum foil processing costs, we revised the company's performance forecast. The company's net profit for 2024-2026 is estimated to be 5.94/6.93/841 million yuan (the previous forecast value for 2024-2025 was 917/994 million yuan), EPS was 0.67/0.78/0.95 yuan, respectively. The PE corresponding to the current stock price is 15.75/13.50/11.12 times, respectively. Considering that the company is a leader in the battery foil industry, the battery foil production expansion rate is leading the industry, so it maintains a “buy” rating.
Risk warning:
Risk of fluctuating processing fees; risk of downstream demand falling short of expectations; risk of increased market competition.