Key points of investment
Incident: The company released the 2023 financial report and the 2024 quarterly report. In 2023, it achieved total operating income of 48.784 billion yuan, a year-on-year increase of 34.38%, and net profit attributable to shareholders of listed companies of 4,050 billion yuan, an increase of 15.42% over the previous year; the company plans to pay a cash dividend of 5.00 yuan (tax included) for every 10 shares to all shareholders. 2024Q1 achieved total revenue of 9.317 billion yuan, a year-on-year decrease of 16.70%, and net profit attributable to shareholders of listed companies of 1,066 billion yuan, a year-on-year decrease of 6.49%.
The scale of mobile storage shipments is growing rapidly, and profitability is stable. The company achieved total revenue of 48.784 billion yuan in 2023, a year-on-year increase of 34.38%. The company's comprehensive gross profit margin was 17.04%, +0.61 pct year on year, net profit margin 9.27%, and -0.84 pct year on year. During the reporting period, the company shipped 28.08 GWh of power batteries, up 64.22% year on year, ranking fourth in the country, achieving operating income of 23.984 billion yuan, up 31.41% year on year. Among them, the company successfully commercialized 46 series large cylindrical batteries, which had more than 4.25 million units offline; energy storage batteries shipped 26.29 GWh, up 121.14% year on year, ranking third in the world, achieving revenue of 16.340 billion yuan, an increase of 73.24% year on year. At the end of the reporting period, the company's operating activities generated a net cash flow of 8.676 billion yuan, an increase of 203.34% over the previous year, mainly due to improved working capital turnover efficiency.
Improve product layout and continuously expand product application scenarios. In terms of cylindrical batteries, the company released all-pole 2170040PL and high-capacity 21700 58E cylindrical battery products to meet the performance requirements of different application scenarios. At the same time, it also released the “Linju” series battery products for the two-wheeler market to help the green and low-carbon transformation of light electric vehicles. In terms of power batteries, the company's passenger car solutions include top products such as 46950, 12V, and 48V, which are suitable for various models such as cars, SUVs, and MPVs. In terms of energy storage batteries, the company launched a new generation of Mr. flagship series products and pioneered the launch of special large iron lithium batteries to effectively solve the multiple management, safety and economic challenges of large-scale power plants. Furthermore, the company has participated in the smart grid construction of the National Grid and China Southern Power Grid at home, and joined forces with Jiangsu Linyang Energy Co., Ltd. and Sunshine Power Co., Ltd. to establish energy storage battery projects overseas with POWIN and W? rtsil? and ABS signed separate strategic cooperation agreements; they also participated in Wotai Energy Co., Ltd. to build a new energy storage platform. In addition, the company set up a medical battery division to develop seven major medical battery solutions according to different needs.
We attach great importance to investment in product research and development, and actively reserve cutting-edge technology in the industry. By the end of the reporting period, the company's lithium metal secondary battery had successfully overcome the three major technical difficulties. Based on a 10Ah battery, it can achieve up to 580Wh/Kg and support 5C output. The semi-solid state battery is based on a 50Ah soft pack battery, which can achieve 400Wh/Kg, a cycle life of more than 1000 cycles, and the usage temperature can be extended to -20℃-80℃. The design has now been finalized. In the field of solid-state batteries, the company has carried out research on polymer solid-state batteries, and has now initially achieved stable operation at room temperature. Large sodium-ion batteries are based on polyanion cathodes and hard carbon anodes. The specific energy is 110Wh/Kg, and the capacity retention rate is as high as 90% at 10C. In the future, ultra-high-capacity green sodium-ion batteries will be developed around the “0” carbon index. In terms of hydrogen fuel cells, the company has completed the development of a 150kW hydrogen battery stack, with a volumetric power density of 4.0 kW/L.
By the end of the reporting period, the company had invested 2,871 billion yuan in R&D, an increase of 26.97% over the previous year, and the number of R&D personnel reached 5,291, an increase of 26.22% over the previous year.
Production capacity continues to expand and actively explore overseas markets and customers. Domestically, the first phase of the company's planned large cylindrical battery factory with an annual production capacity of 20 GWh has already been put into operation in Jingmen, and the first batch of equipment for the second phase will also enter the market at the end of 2023; the planned industry's first 60 GWh energy storage gigafactory with the largest single scale is under construction. Overseas, the company signed a site agreement with PKL and its holding company in Malaysia to invest in a “cylindrical lithium battery manufacturing project”; the company signed a site agreement with a subsidiary of the Hungarian Debrecen government to build a large-scale cylindrical passenger car lithium battery production base in Debrecen, Hungary; reached important cooperation with three internationally renowned companies, DaimlerTruck, PACCAR, and Electrified Power, through the model of charging licensing fees to build power battery production capacity in the US to serve North America Heavy truck market.
2024Q1's gross margin is stable, and energy storage/power shipments have increased dramatically. 2024Q1 delivered 7.02 GWh of energy storage batteries, up 113.1% year on year; power battery shipments were 6.45 GWh, up 5.98% year on year. According to data from the China Automobile Power Battery Industry Innovation Alliance, the company ranked second in domestic NEV commercial vehicle loading volume, with a market share of 16.05%. 2024Q1's comprehensive gross profit margin was 17.64%, +0.81 pct year on year, -0.08 pct month on month, net profit margin 11.33%, -0.29 pct year on year, and +6.50 pct month on month. The company's sales expense ratio was 1.80%, +0.61 pct year on year, +0.49 pct month on month, management expense ratio 2.62%, +0.58 pct year on year, -3.84 pct month on month, R&D expenses rate 7.76%, +1.24 pct year on year, +1.79 pct month on month, financial expenses ratio 0.84%, +0.10pct year on month. By the end of the first quarter, the company's fair value change revenue was -$0.09 billion, down 289.19% year on year, mainly due to changes in fair value of forward settlement contracts due to exchange rate fluctuations; net cash flow from operating activities - $1,751 billion, down 278.73% year on year, mainly due to receipt of payment from customers in the form of bills. Furthermore, in January 2024, the company's subsidiary Hubei Everwell Power and Aksa Jenerat? r SanaYia.? An agreement was signed to jointly establish a joint venture in Turkey to engage in the production, marketing and sales of battery modules, outdoor cabinets, and containers, and implement energy storage system projects in Turkey as a general contractor.
Investment advice: The company continues to grow in energy storage/power battery shipments, successfully commercialize 46 series large cylindrical batteries, and actively lay out cutting-edge technologies in various industries such as solid-state batteries and sodium-ion batteries, and continue to expand overseas markets. Considering the intensification of competition in the industry, we lowered the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 4.986 billion yuan, 5.481 billion yuan, and 6.094 billion yuan respectively (the previous net profit forecasts for 2024-2025 were 7.351 billion yuan and 99.04 billion yuan, respectively). The corresponding PE is 14.7, 13.4, and 12.1 times, respectively, to maintain the “buy-B” rating.
Risk warning: NEV sales fall short of expectations, international trade friction, the company's new production line falls short of expectations, and sharp fluctuations in upstream resource prices.