Core views

Due to the lengthening of the acceptance cycle of lithium battery equipment industry projects in 2023, 2023Q4 and 2024Q1

The company's acceptance scale fell short of market expectations, and in 2023Q4, the company concentrated on preparing for asset impairment, putting pressure on the company's performance in the short term.

Looking ahead to 2024, the company's overseas lithium battery and photovoltaic business orders are expected to maintain high growth, domestic lithium battery business is expected to stabilize, and the company's overall orders and performance are expected to return to growth. Looking at the medium to long term, the company continues to promote its platform-based strategy. The photovoltaic equipment business has achieved volume since 2023, and subsequent businesses such as 3C equipment, laser equipment, and hydrogen energy equipment are expected to open up long-term growth space for the company.

occurrences

The company released the 2023 annual report and the 2024 quarterly report. In 2023, it achieved revenue of 16.628 billion yuan, +19.35%; realized net profit of 1.755 billion yuan, -23.45% year on year; of these, 2023Q4 achieved revenue of 3.442 billion yuan, realized net profit of 549 million yuan, -184.09% year on year; and 2024Q1 achieved revenue of 3.311 billion yuan, +1.14% year on year, achieved net profit to mother of 565 million yuan, +0.21% year on year. Performance fell short of expectations.

Brief review

The lithium battery business acceptance cycle is lengthened and asset impairment preparations are being concentrated, and the company's performance is under pressure in the short term

The inspection scale of 2023Q4 and 2024Q1 companies both fell short of market expectations. The main reason was the general decline in the operating rate of power battery companies in 2023, and the overall progress of production capacity expansion projects was delayed, which led to a lengthening of the order acceptance cycle for the lithium battery equipment industry. Looking at the profit side, 2023Q4's overall losses are mainly due to the company's centralized calculation of accounts receivable, inventory and other assets based on the principle of full prudence. The total impairment preparations for each of the 2023Q4 assets were about 738 million yuan, which had a great impact on the company's overall performance.

Overseas lithium battery equipment and photovoltaic equipment orders are growing rapidly, and there are sufficient orders in hand1) In terms of overseas lithium battery equipment, the company has vigorously deployed the European market since 2021 and has achieved mass supply to leading companies such as Sweden's Northvolt, German Volkswagen, French ACC, and Turkey's SIRO. In 2023, the company established new subsidiaries in Malaysia and Vietnam to further promote the construction of a global delivery system. The company's share of overseas orders reached more than 30% in 2023.

2) In terms of photovoltaic equipment, the company continues to work on the development and mass production of new photovoltaic processes and equipment, and lays out full-line automation equipment for new batteries such as TopCon, HJT, XBC, and perovskite. In 2023, the company's photovoltaic equipment business doubled in terms of new orders, and obtained GW-grade batch orders for 0BB gridless string welding machines, XBC full-process equipment, and TopCon digital solutions.

3) In terms of hand orders, as of 2024Q1, the company's contractual liabilities were 13.955 billion yuan, +34.38% year over year, and the company's inventory was 14.321 billion yuan, +8.25% year over year, indicating that the company's on-hand orders were sufficient.

Profit forecasting and investment advice

In 2024-2026, the company is expected to achieve operating income of 198.48, 229.43, and 26.313 billion yuan, respectively, and +19.37%, +15.59%, and +14.69% year-on-year; the company's net profit to mother will be 34.54, 41.10, and 4.788 billion yuan, respectively, +94.62%, +19.00%, and +16.51% year-on-year, respectively. The corresponding PE is 9.89, 8.31, and 7.13 times, respectively, maintaining the “buy” rating.

Risk analysis

1) Downstream industrial policy change risk: The company's business is highly correlated with China's new energy industry policy. If there are major adverse changes in related industrial policies, it will adversely affect the company's business performance.

2) Order profit is lower than expected: Since 2021, domestic and foreign power battery companies have accelerated production expansion, causing strong demand in the lithium battery equipment industry. At the same time, it has also attracted many automation equipment companies to enter the lithium battery field. As the growth rate of downstream production expansion slows down, there is a possibility that industry competition will intensify in the lithium battery equipment industry, and the profitability of new orders may be under pressure.

3) Expanding into new fields falls short of expectations: If the company develops overseas, energy storage customers fall short of expectations, or have an adverse effect on their new orders.