Event: The company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved revenue of 16.973 billion yuan, a year-on-year decrease of 24.76%; realized net profit of 1,636 billion yuan, a year-on-year decrease of 168.74%; realized net profit deducted from mother of 1,671 billion yuan, a year-on-year decrease of 172.06%; and achieved an overall gross profit margin of 0.19%, down 19.86 pct from 2022. With 2024Q1, the company achieved revenue of 1,892 billion yuan, a year-on-year decrease of 61.74%; realized net profit of 185 million yuan, an increase of 74.25% over the previous year; realized net profit deducted from mother of 192 million yuan, an increase of 73.91% over the previous year; and achieved an overall gross profit margin of 0.03%, an increase of 0.02 Pct over 2023Q1.
Incident reviews:
In 2023, the company's shipments grew steadily, and large fluctuations in raw material prices put pressure on the company's performance.
In 2023, the company achieved sales of 21,900 tons of phosphate cathode materials, up 24.15% year on year; the price of a single ton was 791,000 yuan, down 39.55% year on year from 2022; net profit per ton was -0.78 million yuan, down 21,300 yuan from 2022; and gross profit per ton was 0.02 million yuan, down 26,000 yuan from 2022. The sharp decline in the company's performance was mainly due to a sharp drop in the price of lithium raw materials against the backdrop of a slowdown in downstream demand growth and increased competition in the industry. The sales price of the company's products fell, production capacity utilization declined, and raw material inventories caused large impairment losses.
Losses per unit of product narrowed in 2024Q1 and are expected to reverse losses throughout the year. In 2024Q1, the company achieved sales of 45,000 tons of phosphate cathode materials, an increase of 14% over the previous year; the price per ton was about 42,000 yuan/ton, down 371,000 yuan from the average price in 2023; the net profit per ton was -0.43 million yuan, gross profit per ton was 0.03 million yuan, and the unit loss narrowed. There are still losses in 2024Q1, mainly due to the decline in capacity utilization due to the Spring Festival holiday in the first quarter and the increase in product costs and the decline in sales prices due to the reduction in processing fees at the beginning of the year. Beginning in the second quarter, we expect processing fees to stabilize, compounded by a gradual recovery in the company's capacity utilization rate, and the company's 2024 performance is expected to reverse losses.
The company has a production capacity of 495,000 tons/year for phosphate cathode materials, and has built a production capacity of 5,000 tons/year for lithium supplements. In 2023, the company built nano-lithium iron phosphate with an annual production capacity of 265,000 tons/year. Part of the production capacity of the Qujing German lithium manganese iron phosphate project with an annual output of 110,000 tons has been released. The Yibin German Era phosphate cathode material project with an annual output of 80,000 tons is expected to be put into operation this year. The company's forward-looking layout of lithium manganese iron phosphate creates a first-mover advantage, and in the context where its demand has not yet been released on a large scale, the company can switch some production lines to produce lithium iron phosphate, thereby helping to stabilize the company's operating performance. In addition, the company's lithium supplement product is the world's first cathode lithium supplement material to achieve mass production. It has outstanding first-mover advantages and leading performance advantages. It has now built a lithium supplement production capacity of 5,000 tons/year. The industrialization progress is at the leading level in the industry, and it is expected to become a new growth point for the company's performance.
The company's operating cash flow has improved dramatically, and capital expenditure has declined markedly. In 2023, the company's net operating cash flow changed from negative to positive, reaching 5.993 billion yuan, up 197.68% year on year; 2024Q1 net operating cash flow was -718 million yuan, up 8.38% year on year from 2023Q1.
The improvement in the company's cash flow is mainly due to the combined effects of increased collection and discounting of bank accounts receivable due, compounded by a decrease in the scale of raw material procurement amounts. In the future, as the company's operating performance improves, it is expected that the company's cash flow will continue to improve. In addition, the company's capital expenditure for 2023 and 2024Q1 was $1,627/211 million, respectively, a year-on-year decrease of 36.35%/71.19%.
Investment advice:
We revised the company's performance forecast. The company's net profit for 2024-2026 is estimated to be 1.81/566.965 billion yuan (the previous forecast value for 2024-2025 was 19.13/2.05 billion yuan), EPS was 0.65/2.03/3.45 yuan, respectively, and the current stock price corresponding to PE is 56.30/18.03/10.59 times, respectively. Considering that the company is a leading company in the lithium iron industry, its short-term performance is under pressure, and it still has a competitive advantage in the long term, so it maintains a “buy” rating.
Risk warning:
Risk of fluctuations in raw material prices; risk of downstream demand falling short of expectations; risk of increased market competition.