Results for '23 and 1Q24 fell short of our expectations
The company announced its results for the year 23 and 1Q24: in '23, the company achieved revenue of 6.932 billion yuan, -24% year on year; net profit to mother of 43 million yuan, -93% year on year; net profit after deducting non-attributable net profit of 58 million yuan, -90% year on year. 1Q24 achieved revenue of 1,597 billion yuan, -36% YoY +34%; net profit to mother of 0.16 million yuan, -91% YoY/+107% month-on-month; net profit of 4.31 million yuan after deducting non-return to mother, -97% /month-on-month +102% YoY. The company's performance in '23 and 1Q24 fell short of our expectations, mainly due to insufficient demand for downstream energy storage and increased competition, putting pressure on the energy storage business.
Development trends
European household storage was slow in '23, energy storage business was under pressure, and 1Q improved month-on-month. We expect the company's energy storage shipments to be ~5.4 GWH in 23, down 10% + year on year, mainly due to slow storage and removal of European households, while large storage is affected by low downstream investment sentiment, falling lithium carbonate prices, and the pace of delivery is slowing; we expect 1Q24 energy storage shipments to be close to 2 GWH, basically flat year over year/significant increase of 90% + month-on-month; looking ahead, we expect European households to store and continue until the end of 2Q24. The industrial chain is expected to benefit from an inflection point of the industrial chain. At the same time, industrial and commercial storage is expected to benefit from the expansion of electricity differences in domestic peaks and valleys, and lithium carbonate prices Low operation, continuous growth in installed capacity, company storage Shipments to the energy business are expected to resume rapid growth.
The consumer business is growing steadily, and the power business is being pressured by major downstream customers leaving the warehouse. We expect the company's consumer business revenue to be ~2.5 billion yuan in 23, up 20% + year on year, 1Q24 revenue ~ 550 million yuan, +8% YoY/-7% month-on-month. The power business in '23 was affected by the departure of major customer Wuling, and shipping performance was sluggish, but the company is actively breaking down the situation and developing new customers. We expect the power business to gradually recover in '24.
1Q comprehensive gross margin increased month-on-month, and the level of cost control was good. The company's 1Q24 consolidated gross margin was 11.8%, up 8.1ppt/month-on-month +5.3ppt. We are optimistic that with the recovery in European demand and the stabilization of lithium carbonate prices, downstream will gradually enter inventory replenishment, driving the company's operating rate to increase, and gross margin is expected to be repaired. The cost rate for the period (including R&D) was 11.6%, +1.8ppt/month-on-month -5.6ppt, maintaining good cost control capabilities.
Profit forecasting and valuation
Due to slow withdrawals and terminal price reductions in Europe, we lowered our 24-year profit forecast by 38% to $420 million, and introduced a 25-year profit forecast of 550 million yuan. The company is currently trading at 29.1x/22.0x24/25e P/E. Taking into account profit forecast adjustments and optimism that downstream energy storage demand will drive the rapid growth of the company's energy storage business, we lowered the target price by 23% to 27 yuan, corresponding to 32.0x/24.2x24/25e P/E and 10% upward space, maintaining an outperforming industry rating.
risks
Global demand for energy storage fell short of expectations, sales of new energy vehicles in China fell short of expectations, raw material prices fluctuated sharply, and market competition increased risks.