Investment events
(1) In 2023, the company's revenue was 12.042 billion yuan, down 4.36% year on year; net profit to mother was 2,527 billion yuan, down 36.84% year on year; net profit after deducting non-return to mother was 2,461 billion yuan, down 35.90% year on year; it is planned to distribute a cash dividend of 15.51 yuan (tax included) for every 10 shares.
(2) In the first quarter of 2024, the company's revenue was 2,328 billion yuan, down 9.38% year on year; net profit to mother was 158 million yuan, down 75.64% year on year; net profit after deducting non-return to mother was 149 million yuan, down 76.25% year on year.
Key points of investment
Product prices continued to drop, and the short-term pressure on 2024Q1 profitability was affected by falling product prices. The company's profitability bottomed out at an accelerated pace in the first quarter of 2024. The gross profit margin and net interest rate were 18.9% and 6.8%, respectively, down 27.2 and 19.7 percentage points year on year, and 9.6 and 5.9 percentage points month on month. The fee rate for the first quarter of 2024 was 15%, an increase of about 3 percentage points over 2023, mainly due to a significant increase in the management fee rate.
The production capacity utilization rate is relatively high in 2023. Overseas bases are expected to relay the output by the end of 2023. The company's lithium battery diaphragm design capacity will reach 9.4 billion square meters per year, sales volume is 6.2 billion square meters (including products A and B), and the capacity utilization rate is 83%, maintaining a relatively high level. By the end of 2023, the company's construction project was 6.2 billion yuan. Domestic diaphragm production capacity includes Chongqing Enjie (Phase II), Jiangsu Enjie, Hubei Enjie, and Yuxi Enjie. Based on the investment intensity of coating wet diaphragms, it is estimated that the production capacity of lithium battery diaphragms under construction is about 2-25 billion square meters. We think this increase is relatively reasonable, and dry diaphragms are expected to be released. In terms of overseas layout, the company's Hungarian base has been completed, the first coating film production line has been launched, and the first base film production line has been completed. The first phase is planned to have a production capacity of more than 400 million square meters, and production will be officially put into operation in 2024; the company's US base is accelerating, and it plans to invest about US$276 million to build a 700 million square meter lithium-coated diaphragm production line (14 in total).
New product development has progressed, and semi-solid products have entered the trial production process. In terms of product development, in order to improve the fast charging performance of lithium batteries, a new generation of ultra-high strength and high porosity base films for power independently developed by the company has entered the promotion stage; in the field of semi-solid batteries, the company has established a joint venture with Beijing Weilan and Tianmu Pilot to carry out R&D and production of semi-solid electrolyte-coated diaphragms and various high-end coating diaphragms. The first phase of the project has completed the basic construction of 2 high-performance film coatings. The production line has entered trial production session.
Profit forecasting and valuation
The profit forecast was lowered and the “gain” rating was maintained. Considering the intensification of competition in the industry and the decline in product prices and profits, we lowered the company's net profit to mother in 2024-2025 to 1,613 billion yuan and 2,497 billion yuan, respectively (5,061 billion yuan and 6.352 billion yuan before the reduction), and added the 2026 forecast to 3.476 billion yuan. The corresponding EPS is 1.65, 2.55, and 3.55 yuan/share, respectively. The current stock price corresponds to PE 24, 16, and 11 times, respectively. Maintain an “Overweight” rating.
Risk warning
Market competition intensified, raw material prices fluctuated, production capacity fell short of expectations, and product prices fell sharply.