Key points of investment

The company's net profit for Q1 in '24 was 380 million yuan, which was in the median forecast, in line with market expectations. Q1 revenue in '24 was 9.3 billion yuan, up 18%, up 15%, net profit to the mother was 380 million yuan, up 11%, down 32%, after deducting non-net profit of 340 million yuan, 35%, 25%, gross profit margin 14%, 2.3 pct, 2.9 pct, net profit margin 4.1%, 0.2 pct, and 2.9 pct. The company previously predicted net profit of 36-400 million yuan for 24Q1, which was in the median forecast, in line with market expectations.

Shipments of 24Q1 precursors increased slightly month-on-month, and shipments are expected to maintain an increase of about 25% in '24. On the shipping side, the company's 24Q1 precursor shipments are 60,000 tons+, with a slight increase over the previous month. Among them, we expect to ship 57,000 tons of precursor precursors, increase 5% +, quad-cobalt shipments of 50,000 tons, and ship about 50,000 tons of phosphorus and sodium; the effective production capacity of the third precursor at the end of Q1 will reach 300,000 tons. In 24 years, downstream Tesla pickups, Samsung SDI, etc. will increase. We expect shipments of iron phosphate production capacity to maintain 20-25% increase, and the total shipment capacity of iron phosphate is estimated to be 340,000 tons. 10,000 tons, an increase of about 25%.

In 24Q1, a single ton deducted nearly 60,000/ton of non-net profit, which was mainly affected by minority shareholders' rights and price reductions. On the profit side, we estimate that in 24Q1, if 0.1-0.2 billion yuan of phosphorus-based sodium product losses were added, the single-ton precursor withheld non-profit of nearly 60,000 yuan. The month-on-month decline was mainly due to the increase in minority shareholders' equity to 140 million yuan. If added back, the company's overall net profit of 520 million yuan, and the overall net profit deducted from a single ton reached 0.75 million per ton, a decrease of about 5% over the previous month. The company's 55,000-ton nickel-iron project in Indonesia is in full operation in 24Q1. We expect the equity output to be 6-7k tons; in addition, the company's two oxygen-rich side blowing lines are progressing smoothly, and the RKEF production line will be put into operation one after another. We expect the nickel smelting production capacity to increase to 180,000 tons by the end of the year. The integration ratio will increase dramatically, supporting the quarterly improvement of subsequent unit profits.

Q1 The cost rate decreased significantly from month to month, and inventory decreased compared to the beginning of the year. The cost rate for the 24Q1 period was 7.4%, with an increase of 0.8 pct and a loop reduction of 3.2 pct. Among them, the management cost ratio was 2.5%, the financial cost ratio was 1.8%, and the loop was reduced by 1.1 pct. The main reason was the introduction of combat investment, the R&D cost rate was 2.7%, and the ring reduction was 0.8 pct.

Inventory at the end of Q1 was 7.5 billion yuan, a decrease of 22% from the beginning of the year; impairment losses of $06 billion were transferred back to assets in Q1.

Net cash flow from Q1 operating activities was 780 million yuan, up 188% from the same period, a decrease of 65%; Q1 capital expenditure was 1.2 billion yuan, down 28% from the same period, a decrease of 41%.

Profit forecast and investment rating: We maintain the company's 2024-2026 profit forecast. We expect the company's net profit to be 23.7/28.5/3.47 billion yuan in 2024-2026, an increase of 22%/20%/22%, corresponding to 14x/11x/9xPE. Considering that the company is the largest domestic precursor manufacturer, we will give 20 times PE in 2024, corresponding to a target price of 71 yuan, and maintain a “buy” rating.

Risk warning: Raw material prices fluctuate more than market expectations, and sales volume and policies fall short of expectations.