Incident: In 2023, the company achieved operating income of 12.042 billion yuan, -4.36% year on year; net profit to mother of 2,527 billion yuan, or -36.84% year on year; realized net profit without deduction of 2,461 billion yuan, or -35.90% year on year. 2024Q1 achieved operating income of 2,328 billion yuan, -9.38% year over year; net profit attributable to mother was 158 million yuan, -75.64% year over year; realized net profit without return to mother of 149 million yuan, -76.25% year over year.
Comment:
24Q1 performance was under pressure, and the cost ratio increased. The company's gross margin in 2023 was 37.43%, down 10.4pct year on year, and the sales expense rate/management expense ratio was 0.74%, 3.18%, and 6.04%, respectively, and the cost ratio increased; the 2024Q1 gross margin was 18.87%, down 27.2pct year on year, and the sales cost rate/management cost ratio/R&D expense ratio were 0.78%, 5.67%, and 6.58%, respectively. The company's performance is under pressure, mainly due to factors such as downstream inventory removal and cost reduction requirements, the centralized release of new production capacity by diaphragm companies, and increased market competition.
Overseas production capacity has been accelerated, and research and development of new products such as semi-solid diaphragms continues to advance. 1) The company's Hungarian lithium battery separator production base has been completed, the first coating film production line has been launched, and the first base film production line has been completed. It is expected that the Hungarian production base will respond quickly to the needs of customers in Europe and other places starting in 2024. Furthermore, in order to speed up the progress of the company's US lithium battery isolation film project, quickly respond to the needs of customers in North America, and increase the global market share of the company's diaphragm products, the company adjusted the investment amount of the US lithium battery isolation film project to about 276 million US dollars in January 2024 to build 14 lithium battery coating diaphragm production lines with a total annual production capacity of 700 million **** meters. The company's global market share is expected to increase further. 2) The company's self-developed next-generation ultra-high strength and high porosity base film for power has entered the promotion stage; a new generation of low-closed-cell temperature high-safety diaphragms has been mass-produced; in the field of semi-solid batteries, the company has established a joint venture with Beijing Weilan and Tianmu, Jiangsu Sanhe to develop and produce semi-solid electrolyte coated diaphragms and various high-end coating diaphragms. The first phase of the project has completed basic construction. 2 high-performance coating film production lines have entered the trial production process.
Profit forecast and investment rating: We expect the company's net profit to be 15.38/21.55/ 3,079 billion yuan in 2024-2026, respectively, -39%, 40%, and 43% year-on-year. As of April 26, the market value corresponding to the 24-25 PE valuation was 25/18 times, respectively, maintaining a “buy” rating.
Risk factors: risk of industry demand falling short of expectations; risk of iterative changes in technology; risk of raw material price fluctuations exceeding expectations; environmental protection and production safety risks, etc.