On April 25, 2024, the company released its 2024 quarterly report: 2024Q1 achieved operating income of 3.454 billion yuan, +4.84% year over month, -8.30% month on month; realized net profit of 156 million yuan, -4.86% year on month, -9.18% month on month; realized net profit without return to mother of 168 million yuan, +35.44% year on month, and +11.26% month on month.

2024Q1 performance was in line with expectations, with steady growth in revenue and profit. 2024Q1 achieved operating income of 3.454 billion yuan, +4.84% year-on-year, and -8.30% month-on-month; realized net profit of 156 million yuan, -4.86% year-on-year and -9.18% month-on-month. Achieved net profit of 168 million yuan after deduction, +35.44% year-on-year and +11.26% month-on-month. Operating revenue grew steadily, mainly benefiting from the continued increase in low-voltage battery revenue; net profit after deducting non-return to mother improved markedly compared to the previous month.

Gross margin increased significantly, and expenses were properly controlled during the period. 1) Gross profit margin: 2024Q1's comprehensive gross margin was 17.28%, +2.07pct year over year, and +1.00 month-on-month, mainly benefiting from large-scale benefits brought about by increased sales of low-voltage batteries. 2) Expense side: The cost rate during 2024Q1 was 10.76%, +0.27pct year over year, and +0.04pct month-on-month.

Among them, the sales expense ratio was 5.13% (YoY +0.39pct, month-on-month -0.50pct), the management expense ratio was 3.00% (YoY +0.14pct, month-on-month +0.15pct), the R&D expense ratio was 2.01% (+0.19pct YoY, -0.06pct month-on-month), and the financial expense ratio was 0.62% (YoY -0.45pct, month-on-month +0.44pct), and the expenses for the period were properly controlled.

New businesses such as low-voltage lead-acid batteries, lithium batteries, and energy storage continue to advance. The company is a leading domestic low-voltage lead-acid battery. According to the 2023 annual report, the company sold a total of 34.6 million KVAH of low-voltage batteries in 2023, +7.45% compared with the same period last year, and received 60 new OEM projects, and its market share increased steadily. In terms of overseas business, Malaysia Phase II was completed and put into operation in September '23. It currently has an annual production capacity of 4 million KVAH, and overseas business is expanding smoothly. In addition, in terms of lithium battery business, the company has completed 35 designated projects for 12V/24V/48V lithium batteries. In terms of energy storage, it also continues to promote industrial and commercial energy storage, household storage, etc., and is jointly promoting multiple businesses.

Investment advice: The company is a leading enterprise in the domestic lead-acid battery industry, and its business is gradually expanding to lithium batteries and energy storage. With the development of maintenance markets and overseas markets, the company's share is expected to increase further. We maintained the company's revenue for 2024-2026, which were 15.995 billion yuan, 17.626 billion yuan, and 19.426 billion yuan respectively, and net profit to mother was 743 million yuan, 922 million yuan, and 1,074 billion yuan respectively. Based on the closing price on April 29, 2024, the company's current market value is 9.784 billion yuan, corresponding to 2024-2026 PE being 13.17X, 10.61X, and 9.11X respectively, maintaining a “buy” rating.

Risk warning: Risk that the automobile industry is sluggish, overseas business expansion falls short of expectations, lithium battery penetration rate does not meet expectations, and the information and data used in research reports are not updated in a timely manner.