Revenue and net profit to mother declined year-on-year in '23
The company achieved revenue of 10.729 billion yuan in 2013, or -40.31% year on year, net profit to mother - 124 million yuan, -108.36% year over year, net profit after deducting non-return to mother - 181 million yuan, or -112.59% year on year, in line with the performance forecast range. Considering the weak demand for cathode materials and increased competition, we revised our shipping volume and gross margin assumptions to estimate the company's net profit forecast for 24-26 to be 2.71/3.72/479 million yuan (2,99/1,596 billion yuan 24-25 years ago). Due to the company's declining lithium iron phosphate production capacity in '24, which dragged down profits, the 25-year profit is expected to recover. Referring to the company's 25-year Wind, the average PE is 19 times higher. Considering the company's leading overseas layout, the lithium iron phosphate business is more flexible. The company was given 31 times the target PE for 25 years, corresponding to a target price of 5.98 yuan (previous value of 10.58 yuan), maintaining the “gain” rating.
4Q23 lithium iron phosphate production capacity climbed down performance. 1Q24 profitability increased the company's 4Q23 net profit of -197 million yuan year-on-year, -152.32% year over year, net profit after deducting non-return to mother -205 million yuan, -156.44% year on year. 4Q23 achieved gross and net margins of -0.04%/-8.32%, respectively, -5.54/-8.54pct. The company's profitability declined, which we estimate is mainly due to fluctuations in raw material prices, a decline in production capacity in the lithium iron phosphate business, and an estimated asset impairment of 113 million yuan. The company's 1Q24 net profit to mother was 0.3 billion yuan, +243.45% year-on-year, after deducting net profit of non-return to mother - 190 million yuan, a year-on-year reduction in losses. 1Q24 achieved gross and net margins of 8.40%/0.29%, respectively, +8.44/8.62pct month-on-month.
The fee rate for the 23-year period was 5.11%, +0.74pct year-on-year, mainly due to an increase in interest on the company's convertible bonds.
The cathode materials business was temporarily under pressure in '23. Lithium iron phosphate is expected to continue to sell 620,000 tons of cathode materials in '23, -5.83%, mainly due to declining domestic ternary material penetration rate and reduced demand from downstream customers; battery materials business revenue of 10.607 billion yuan, -40.77% YoY. In addition to declining sales volume, lithium carbonate led to a significant year-on-year decline in the unit price of cathode materials; the gross profit margin of battery materials was 4.05%, -10pct year on year, mainly due to sharp fluctuations in raw material prices and a decrease in production capacity utilization. The company currently has a production capacity of 120,000 tons of ternary materials and 60,000 tons of lithium iron phosphate. The production capacity of lithium iron phosphate continues to rise, and shipments are expected to grow rapidly.
New technology progresses smoothly, laying the foundation for forward-looking layout
The company's cutting-edge technology has been developed smoothly. 1) High-power high-nickel: high-power high-nickel NCA materials have been recognized by leading customers in the field of power tools, forming hundreds of tons of shipments; 2) monocrystalline high-nickel: overcoming key technical problems such as 9 series monocrystals, medium and high nickel 4.4V high voltages, and passed customer verification; 3) Sodium electrodes:
First-generation layered products achieved tonnel-level sales; 4) Ultra high nickel ternary: Key products such as ultra-high nickel ternary and xHeV ternary have all entered mass production.
Risk warning: Downstream NEV sales fall short of expectations; demand for ternary cathode materials falls short of expectations due to declining penetration rate of ternary cathode; profitability falls short of expectations due to increased industry competition.