incident. On April 24, 2024, the company released its 2023 annual report and 2024 quarterly report. In '23, the company achieved annual revenue of 12.042 billion yuan, a year-on-year change of -4.36%, achieving net profit of 2,527 billion yuan, a year-on-year change of -36.84%, and net profit without deducting net profit of 2,461 billion yuan, a year-on-year change of -35.90%.
24Q1 performance split. Revenue and net profit: The company's 2024Q1 revenue was 2,328 billion yuan, -9.35% year on month, -21.06% month on month, net profit to mother was 158 million yuan, -75.65% year on year, -57.64% month on month, net profit after deduction of 149 million yuan, -76.27% year on year and -63.39% month on month. Gross profit margin: 2024Q1 gross margin was 18.87%, year-on-year -27.16pct, month-on-month -9.56pct. Net interest rate: 2024Q1 net margin was 6.75%, -19.66pcts yoy, -5.87pcts month-on-month. Expense ratio: The company's expense ratio for the 2024Q1 period was 14.99%, year-on-year -1.48pcts. Among them, sales, management, R&D, and finance expenses were 0.77%, 5.67%, 6.57%, and 1.98%, respectively.
Net profit is under pressure from Shan Ping, and core product development enhances competitiveness. In '23, the company shipped 6.2 billion square meters of diaphragms, a slight increase over the previous year, corresponding revenue of 10.082 billion yuan, a slight decline over the previous year. Net profit for the full year of '23 was about 0.37 yuan, and net profit for 24Q1 was 0.1 yuan +. Earnings in the first quarter were clearly under pressure, mainly affected by increased market competition and falling product prices. In terms of products, the company's self-developed ultra-high strength and high porosity base film for power has entered the promotion stage. The third-generation low closed cell temperature and high safety base film has completed customer reviews and has mass production capacity.
Semi-solid lithium-ion conductive diaphragms have been mass-produced in small batches. In addition, the basic construction of the first phase of the semi-solid electrolyte coating diaphragm and various high-end coating diaphragm projects developed by the company in cooperation with Weilan New Energy and Tianmu Pilot has been completed, and trial production of two high-performance coating film production lines has begun.
Production capacity projects are progressing well, and the overseas share continues to rise. 1) Domestic: The first phase of the Chongqing Enjie High Performance Lithium Ion Battery Microporous Membrane Project, the Suzhou Jieli Project with an annual production of 200 million square meters of lithium battery coating diaphragm have been put into operation, and 7 production lines of the Chongqing Enjie High Performance Lithium Ion Battery Microporous Membrane Project have been put into operation. The company continues to promote a joint venture with Cergard to build a dry lithium battery separator project. The first dry membrane production line was put into operation during the reporting period, and the rest of the production lines were launched one after another. 2) Overseas: In '23, the company achieved revenue of 2,017 billion yuan in overseas regions, accounting for 16.75%, an increase of 6.17pcts over the previous year. The construction of the company's Hungarian base has been completed, and the first coating film production line has been put into operation. It is expected to respond quickly to European customer needs starting in 2024. In the US region, the company adjusted the investment amount for the US lithium battery isolation film project to about US$276 million in January 2024 to build 14 lithium battery coating diaphragm production lines with a total annual production capacity of 700 million square meters. As the company's production capacity is released one after another, the global market share is expected to increase further.
Investment advice: We expect the company to achieve revenue of 134.84, 170.76, and 19.831 billion yuan in 2024-2026, with year-on-year growth rates of 12.0%, 26.6%, and 16.1%, net profit to mother of 18.24, 25.74, and 3.422 billion yuan, respectively. The year-on-year growth rates are -27.8%, 41.2%, and 32.9%, corresponding PE is 21, 15, and 11 times. Considering that the company is actively building an integrated industrial chain and leading the overseas market process, maintaining the “recommended” rating.
Risk warning: Competition in the diaphragm industry has intensified, overseas production capacity has been blocked, and upstream raw material prices have fluctuated beyond expectations.