Key points of investment
24Q1 achieved net profit of 0.3 billion yuan to mother, a decrease of 54%, in line with market expectations. The company's 24Q1 revenue was 5.1 billion yuan, up 14%; the net profit to the mother was 0.3 billion yuan, down 80%; 54%; after deducting non-net profit of 0.27 million yuan, the same decrease of 81%; the 24Q1 gross profit margin was 10%; the 24Q1 gross profit margin was 10%; the same decrease was 4 pct, and the quarter increased by 1 pct, in line with market expectations.
24Q1 battery foil shipments continued to increase slightly year over year, and are expected to grow 25% in '24. We expect the company to ship 26,000 tons of 24Q1 battery foil, a slight increase of about 5% over the previous year. The company's production schedule will increase significantly from April. We expect Q2 shipments to increase by 30%, and annual battery foil shipments are expected to reach 160,000 tons, achieving an increase of about 25%. In terms of profit, the non-profit deducted per ton of Q1 battery foil fell to about 20,000 yuan, down 10,000 yuan from the previous month, mainly due to lower processing costs and lower capacity utilization. Currently, aluminum foil processing costs have basically bottomed out. We expect profit per ton to reach about 0.25 million yuan in 24, and to return to around 30,000 yuan in 25.
24Q1 packaging foil losses gradually narrowed, and subsequent gradual recovery in demand is expected to turn losses into profits. We expect 24Q1 packaging foil shipments to be around 65,000 tons, with a significant month-on-month increase. The loss per ton in Q1 narrowed to about 0.05 million yuan/ton. The company currently has production capacity of 120,000 tons of food packaging foil in Italy and 15,000 tons in Germany. Losses are due to high production costs and declining production capacity in overseas factories. In the future, as overseas packaging foil demand recovers, we expect to gradually turn losses into profits in 24 years. We expect the 24Q1 air conditioning foil and strip to be shipped around 100,000 tons, which will remain flat from month to month, and will basically maintain marginal profit.
Expenses are well controlled, and capital expenditure has declined significantly. The fee rate for the 24Q1 period was 7%, down 0.7 pct from the previous year, and the cost control was good; inventory at the end of 24Q1 was 4.34 billion yuan, an increase of 12% over the beginning of the year; asset impairment losses were estimated at 0.2 billion yuan in 24Q1, and credit impairment losses were calculated at 0.3 billion yuan. Net cash flow from 24Q1 operating activities was 550 million yuan, which turned negative year on month; 24Q1 capital expenditure was 50 million yuan, down 31% year on year.
Profit forecast and investment rating: As demand for overseas packaging foil is still weak, we lowered the company's profit forecast for 2024-2026. We expect net profit from 2024-2026 to be 4/6/850 million yuan (originally estimated at 50/73/95 million yuan), -25%/+52%/+40%, corresponding PE is 24x/16x/12x, maintaining the “buy” rating.
Risk warning: Prices of raw materials continue to rise, battery foil production expansion falls short of expectations, and competition is intensifying.