Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 689 million yuan, -7.72% year-on-year, mainly due to declining nickel prices compounded by changes in product structure; net profit to mother of -0.32 million yuan, -121.05% year-on-year, mainly due to companies with large declines in nickel prices accruing inventory impairment, compounding the decline in the share of the company's high-margin product structure; net profit not attributable to mother was -38 million yuan, -125.28% year over year. 2023Q4, the company achieved revenue of 198 million yuan, -5.13% month-on-month; net profit to mother of -45 million yuan, -41 million yuan month-on-month, net profit of non-return to mother -30 million yuan, and -28 million yuan month-on-month, mainly due to inventory impairment and return of government subsidies in 23Q4. With 2024Q1, the company achieved revenue of 200 million yuan, +1.16% month-on-month, net profit of 0.16 million yuan, +61 million yuan month-on-month, net profit after deducting non-return of 10 million yuan, and +41 million yuan month-on-month, mainly due to a significant decline in high-priced inventory costs after a year of turnover, while sales of structure-side high-margin products improved.
Volume: Sales of nickel powder continued to grow, the recovery trend was clear, and the volume of silver-wrapped copper began to be released. In 2023, the company sold 1,045 tons of nickel powder, +6.43% year on year, 22.41 tons of copper powder, 60.13 tons of copper powder, +9.02% year on year, and 4.46 tons of silver powder, or -31.01% year on year. The company's nickel powder sales increased quarter by quarter, the recovery momentum was clear, and the volume of bank-wrapped copper powder was successfully released. 2024Q1, the company's sales of high-end nickel powder products have shown a marginal improvement trend. At the same time, the pace of launching high-margin nickel powder products is progressing steadily, and structural optimization or profit inflection points are approaching. Meanwhile, against the backdrop of rising silver prices, the will to apply silver wrapped copper powder has increased, which is beneficial to the continued release of silver-wrapped copper powder products.
Price: The gross margin of nickel powder continues to recover, and the profit inflection point has arrived. In 2023, the company's gross margin was about 15.04%, compared to -21.74pct, mainly due to a decline in nickel prices, which dragged down profits. At the same time, the company's high-margin product sales declined significantly; 2023Q4, the company's gross profit margin was 13.35%, -3.51 pct month-on-month, mainly due to the accelerated decline in nickel prices in 23Q4; 24Q1, the company's gross profit margin was 18.79%, mainly due to the stabilization of nickel prices, and a slight improvement in the product structure. By product, the gross profit margin of the company's nickel powder in 2023 was 18.36%, a year-on-year period of -23.74pct, and the gross profit margin of cash-wrapped copper powder was 12.54%.
Impairment & Inventory: Nickel prices declined in 2023, and the company calculated asset impairment reserves and credit impairment reserves totaling RMB 29.516 million. As of 2024Q1, the company's inventory was 396 million yuan, showing a continuous downward trend, mainly due to the continuous increase in the company's nickel powder shipments and the decline in nickel prices. In 2023, nickel prices showed an overall downward trend. The average nickel price for the whole year was 175150.39 yuan/ton, down 12.61% year on year; nickel prices accelerated downward in 23Q4. On December 29, 2023, the nickel price was 131930.00 yuan/ton, down 24.68% from the average nickel price for the whole year of 2023. 2024Q1, the average nickel price was about 134039.66 yuan/ton, -5.08% month-on-month.
Investment advice: We believe that there is a clear trend of recovery in demand in the electronics industry. Along with the launch of new products, the company's nickel powder business is expected to achieve a double increase in volume and profit, and the shipment volume of bank-wrapped copper powder is also expected to continue to increase, and performance is expected to continue to improve month-on-month. Relying on its core technical advantages, the company has built a solid moat. The competitive pattern is excellent, the “two wings in one” layout, and the room for growth can be expected. We expect the company's net profit forecast for 2024-2026 to be 0.84, 180, and 262 million yuan, based on the closing price on April 30, 2024. PE is 70X, 33X, and 23X, respectively, maintaining the company's “recommended” rating.
Risk warning: demand falls short of expectations, new product progress falls short of expectations, risk of raw material price fluctuations, etc.