In 2023, the company achieved revenue of 10.5 billion yuan, YOY +21%, net profit of 1.20 billion yuan, YOY +33%, net profit of 1.16 billion yuan, YOY +37%, gross profit margin 23.6%, YOY-0.3pct, net profit margin 11.6%, YOY+1.0pct, net operating cash flow of 750 million yuan, YOY +71%.

The company was one of the rare companies in the lithium battery materials industry chain to achieve positive profit growth in 2023, proving the company's competitive advantage from a performance perspective. With advanced technical level, high-quality production capacity, efficient R&D and supply system, and excellent product quality, the company's customers cover world-renowned power battery and automobile manufacturers, such as CATL, China Airlines, Tesla, Panasonic, Northvolt, ACC, and LG.

Our analysis of the business situation in the first quarter of 2024 is as follows:

1) Operating data: The company achieved revenue of 2.51 billion yuan, YOY +8%, QOQ -9%, net profit to mother of 310 million yuan, YOY +28%, QOQ -24%, net non-net profit of 295 million yuan, YOY +27%, QOQ -24%, net operating cash flow of 230 million yuan, year-on-year correction and month-on-month decline.

2) Gross margin analysis: The company's 2024Q1 gross profit margin was 22.2%, YoY+0.04pct, and -2.1pct month-on-month. We believe that the month-on-month decline was due to a month-on-month decline in capacity utilization due to a decline in revenue. The year-on-year increase indicates that the company has a strong ability to control costs under the general price reduction in the industrial chain.

3) Net interest rate analysis: The company's 2024Q1 net interest rate reached 12.3%, YoY+1.8pct. We believe that the year-on-year increase was due to a decrease in expenses and an increase in other benefits. The absolute value of the company's expenses increased by only 10% year-on-year during the 2024Q1 period. In particular, the cost control of management+sales+financial expenses decreased slightly year-on-year.

4) Major change accounts: The biggest change in the company's 2024Q1 was other income, which reached 57 million yuan in 24Q1, mainly due to an increase in government subsidies.

Investment advice: Compared with the previous profit forecast (April 2023), considering the impact of the industrial chain inventory and price reduction that occurred in 23, we lowered the company's net profit to the mother in 24 and 25 to 1.5 billion yuan (previously forecast 2 to 2.8 billion yuan), and is expected to achieve a net profit of 2.4 billion yuan in 26, maintaining a “buy” rating.

Risk warning: Electric vehicle sales fall short of expectations, demand for energy storage falls short of expectations, price declines exceed expectations, and industry competition intensifies.