Key points of investment:

Single-ton profit bottomed out and rebounded, leading the industry level by a large margin

24Q1 achieved revenue of 4.52 billion yuan (same -66%, ring -36%), realized net profit to mother of 159 million yuan (same -44%, ring +308%), gross margin was restored to 8% (+4.18pct), and net margin was restored to 4% (+2.96pct). 24Q1 sold 136,000 tons of lithium iron phosphate, +33% year-on-year. Net profit per ton (based on integrated calculation) reached 0.12 million yuan/ton, an increase of 0.09 million yuan/ton over the previous month. Profitability rebounded against the trend when processing costs in the industry declined (according to Xinyi lithium battery statistics, the average net profit of lithium iron phosphate in the Q1 industry was -0.18, -0.17, and -0.32 million yuan/ton from January to January, respectively, based on market quotes for raw materials and finished products).

Excellent refined management capabilities, opening up phosphate ore and improving the integrated layout of 24Q1. Inventory at the end of the 24Q1 period reached 2 billion yuan, an increase of 680 million yuan over the previous month. We expect to prepare finished products and raw materials for the peak season; the balance of derivative financial assets is 0.24 million yuan, the balance of derivative financial liabilities is 0.16 million yuan, and hedging continues to develop. Under recent lithium carbonate and phosphorus price trends, it is expected that the impact of rising costs on profits will be mitigated, reflecting the company's flexible inventory management strategy. Guizhou Yuneng Mining has completed the work related to the transfer of prospecting rights to mining rights for Huangjiapo phosphate ore, and will further improve the “resource-precursor-cathode material-recycling” integrated industrial ecological layout.

New energy storage products are based on performance advantages rather than low volume. The operating rate in March was close to full production of 24Q1, accounting for about 21% of energy storage sales. Among them, the new products CN-5 series and YN-9 series sold 0.84 million tons. The company said that although the price was relatively high, their excellent performance was highly recognized by downstream customers, and sales gradually increased. In March, 59,400 tons of lithium iron phosphate were sold, and the capacity utilization rate was over 98%. The increase in scale effect is expected to further amortize fixed costs.

Profit forecasting and investment advice

We expect the company's net profit to reach 11.3/19.8/3.0 billion yuan in 2024-2026 (the previous forecast was 27.6/36.0 billion yuan, mainly considering fluctuations in lithium carbonate prices and a sharp drop in processing costs), with a year-on-year increase of -29%/75%/51%, corresponding to the current market capitalization PE of 23.5/13.4/8.9 times. We believe that with the clean-up of the industry, the company's share and profitability will further increase, consolidating its leading position with scale effects and lean management capabilities, giving 2024 35 Double PE, corresponding to the target price of 52.17 yuan, maintaining the “buy” rating.

Risk warning

Terminal demand fell short of expectations, raw material prices fluctuated greatly, etc.