Incident: The company released its 2023 report and 2024 quarterly report. In 2023, it achieved revenue of 66.304 billion yuan, +5.19% year-on-year; realized net profit of 3.351 billion yuan, or -14.25% year-on-year. 24Q1 achieved revenue of 14.963 billion yuan, or -21.70% year-on-year; realized net profit of 522 million yuan, or -48.99% year-on-year.
Volume: Material shipments have increased in 23 years, structure optimization, and demand for ternary terminals has increased. In 2023, the company shipped nearly 150,000 tons of precursor products (including self-supply), a year-on-year increase of +31%, bucking the trend (global production of three precursors -5%, Xinyi data). Cathode material shipments were about 95,000 tons, +5% year-on-year, high-nickel shipments exceeded 67,000 tons, accounting for 83%; lithium cobalate shipments exceeded 13,000 tons, +32% year-on-year. At the same time, while further deepening ties with Korean customers, the company quickly entered the Japanese market, actively deployed the European and American markets, and continued to improve customer quality. According to the Battery Alliance, the loading volume of 24Q1 ternary batteries increased significantly, accounting for 36%, an increase of 4pp over the previous year, and terminal demand reached an inflection point.
Prices: Prices of material products generally declined, and the prices of lithium and nickel rebounded slightly in 24Q1, but remained low. According to Wind data, since the beginning of 2023, there has been a decline in the prices of lithium, nickel, etc. Among them, the price of lithium carbonate fell from 510,000 yuan/ton to 100,000 yuan/ton, and the price of LME nickel fell from 31,000 US dollars/ton to 16,000 US dollars/ton, and the company's resource-side profit was greatly squeezed. Prices of the main products, ternary precursor and cathode materials, were reduced simultaneously. Affected by strong downstream demand in 24Q1, lithium and nickel prices all showed a slight recovery. The price of lithium rose to 110,000 yuan/ton, and the price of LME nickel increased by about 20,000 US dollars/ton, hitting a maximum of 18,000 yuan/ton. According to the profitability estimates of the company's related business subsidiaries, the company's profit per unit of lithium products is expected to increase significantly on a marginal basis at the end of 2023, and the unit profit of nickel products will reach 20,000 US dollars/ton.
The overseas resource-side layout is progressing steadily, and the global integration layout is deepening. In 2023, on the resource side, the company sold more than 126,000 tons of nickel products, +88% over the same period; with the Huake project reaching production, high-ice nickel shipped 52,000 tons; and MHP shipped more than 100,000 tons throughout the year. Arcadia and the recycling business expanded significantly, with annual sales of 80,000 tons of lithium resources, +104% over the same period last year. On the material side, the European-Hungarian cathode project is progressing in an orderly manner, actively meeting the needs of major overseas customers, and deepening the global integration layout.
Cash flow has improved, and pre-dividend payment rates have increased dramatically. In 2023, the company achieved net operating cash flow of 3.486 billion yuan, +20% over the same period last year. At the same time, with the advancement of GDR, bank-enterprise cooperation, sustainable development loans, etc., it has provided a solid financial guarantee for the company's high-quality development. With the implementation of the company's early resource-side layout, the scale of future investment is expected to shrink year on year, and the company will gradually transition from a period of aggressive expansion to a stage of stable and high-quality development. In addition, the company has implemented the “Improve Quality, Efficiency, and Value Return” special action. It plans to distribute 10 yuan (tax included) for every 10 shares, with a dividend payment rate of over 50%, demonstrating corporate responsibility.
Profit forecasting and investment advice. EPS is estimated to be 2.12 yuan, 2.45 yuan, and 2.78 yuan respectively in 2024-2026, and the corresponding PE is 13 times, 12 times, and 10 times, respectively. The company leads the global integrated layout and has entered a stage of high-quality development. In the short term, we are optimistic about industry investment opportunities brought about by the bottom of the three-yuan demand rebound in 2024, and the high-quality layout on the company's asset side will help medium- to long-term development. Considering that the PE multiple is expected to be digested steadily in the next three years, and currently PE is significantly lower than the industry average (20x, 857371 lithium battery (Shenwan)), maintaining a “buy” rating.
Risk warning: market risk; exchange risk; environmental protection risk; technology research and development uncertainty risk; management risk; multinational operation risk; overcapacity risk, etc.