The 24Q1 results were generally in line with expectations. 24Q1 revenue was 2.5 billion yuan, -43%/-25%; net profit to mother was 100 million yuan, -84%/-18%, after deducting non-net profit of 100 million yuan, -85%/-12% month-on-month; Q1 gross profit margin of 19.5%, -11 pct/-3 pct. The performance was basically in line with expectations.
In 24Q1, 90,000 tons of electrolyte were shipped, which is expected to increase 25% for the whole year. In terms of shipment, we expect the company to ship 90,000 tons of electrolyte in 24Q1, an increase of 10% +, and we expect the company to supply 1,000 tons+ of lithium salt in Q1, corresponding to the electrolyte demand of 10,000 tons. The total lithium salt+ electrolyte shipment will correspond to 100,000 tons of electrolyte, an increase of 20% +. The company's electrolyte capacity utilization rate is gradually increasing, and the external supply of lithium salt in Q2 is expected to double to 0.20,000 tons. We expect Q2 electrolyte shipments to increase by 50%, 30% +, 24. We expect to ship about 500,000 tons of electrolyte throughout the year, an increase of 25% over the same period. Furthermore, the external supply of lithium salt is expected to reach 10,000 tons in 24, corresponding to 80,000 tons + of electrolyte. The total total shipment is expected to reach 55-600,000 tons, an increase of 40% over the same period, and the market share will further increase by 40%.
Unit profit bottomed out in 24Q1, and subsequent external supply of lithium salt contributed to profit elasticity. We estimate that the net profit per ton of 24Q1 electrolyte was 0.11 million yuan, a 60% drop. The price of hexafluoride bottomed out in April '24, and we expect the bottom of 24Q1 profit to be clear. The company began to supply hexafluoride and LiFSi. The current profit per ton of hexafluorofluoride is 10,000 yuan+, which is significantly higher than the profit of 0.4-0.5 million yuan per ton of hexafluoride itself. The gradual increase in the company's lithium salt external supply ratio will significantly increase profits. The increase in combined capacity utilization will drive further cost reduction. We expect a profit of about 20,000 yuan per ton of electrolyte in 24 years, a significant increase from 24Q1, and the profit inflection point is clear.
Iron phosphate losses narrowed in 24Q1, and a break-even balance is expected from H2 onwards. We expect losses of iron phosphate and lithium iron in 24Q1 to be about 50 million yuan, a sharp decrease over the previous month. We expect a further loss reduction in Q2. We expect the total impact of the iron phosphate business on profit of about 100 million yuan in 24, and the resource recovery sector is expected to contribute about 100 million yuan in profit in 24. After considering profits on the resource recovery side, it is expected to reach a break-even balance.
Inventory fell sharply in 24Q1, and operating cash flow declined sharply from month to month. The cost for the Q1 period was 400 million yuan, -2%/+18% compared to the same period, the fee rate was 15%, and +6pct compared to the same period. The main reason was that management expenses increased significantly under the influence of bonuses. Inventory at the end of 24Q1 was 1.3 billion yuan, up 7% from the beginning of the year. Net cash flow from operating activities in 24Q1 was $22 million, a year-on-year correction, with a decrease of 97%.
Profit forecast and investment rating: We maintain the company's net profit forecast for 2024-2026 at 12.13/21.06 billion yuan, -36%/+74%/+47% year-on-year, corresponding PE is 33x/19x/13x. Considering that the company is at the bottom of the cycle, future prices are more flexible to recover profits, and maintain a “buy” rating.
Risk warning: sales volume falls short of expectations, profit level falls short of expectations