Description of the event

Putailai released its 2023 annual report. In 2023, the company achieved operating income of 15.340 billion yuan, a year-on-year decrease of 0.80%, a year-on-year decrease of 38.42%, and realized deducted non-net profit of 1,781 billion yuan, a year-on-year decrease of 39.82%; in the fourth quarter, the company achieved operating income of 3.653 billion yuan, a year-on-year decrease of 9.82% and attributed net profit of 283 million yuan, a year-on-year decrease of 69.92%. The first quarter of 2024 achieved attributable net profit of 445 million yuan, a year-on-year decrease of 36.64%, and realized deduction of non-net profit of 419 million yuan, a year-on-year decrease of 38.25%.

Incident comments

Looking at the company's annual business segment: 1) The anode business achieved shipments of 155,300 tons throughout the year, an increase of 11% over the previous year. The slowdown in growth was mainly affected by downstream battery factories' removal from storage; single-ton profit (excluding graphitization) is estimated to have declined year on year, mainly affected by material price reductions and inventory depreciation. In terms of production capacity, 150,000 tons of anode +110,000 tons of graphitization+100,000 tons of carbonization production capacity was formed at the end of 2023. The first phase in Sichuan was gradually put into operation, and production capacity in the second phase and third phase was steadily advancing; 2) The diaphragm and substrate film business achieved annual sales volume of 5.271 billion square meters, a year-on-year increase of 22%, a market share of 40.73%, and the profit estimate of Shan Ping was stable year on year; automated film sales increased quarterly, and the product had strong cost competitiveness; 3) Lithium battery equipment business: achieved annual operating income of 36 billion yuan (including internal revenue) Equipment business contract delivery scale Significant growth; 4) Other businesses: PVDF business achieved main business revenue of 1,021 million yuan; aluminum-plastic film business achieved shipment of 0.16 million square meters; Jiangsu Zhuoli Phase I 16,000-ton composite collector base has basically completed plant construction, and customers are steadily connected. Furthermore, in 2022, the company set up the solid electrolyte business and completed the LATP and LLZO pilot tests. Currently, it has formed a 200-ton pilot production line at the Sichuan base. The product has good conductivity and other properties. Looking at the fourth quarter of a single quarter, the company's anode shipments continued to grow month-on-month, with single-ton profit (excluding graphitization) estimated to decline month-on-month, mainly affected by price declines and an increase in BYD's share of production capacity; diaphragm coating volume continued to increase month-on-month, and single flat profits were stable; base film estimates contributed to stable month-on-month profits. In addition, the company calculated an impairment of 590 million yuan in the fourth quarter, mainly due to a drop in the price of anode products. At the same time, government subsidies and sales tax rebates are expected to be around 170 million yuan by the end of the year.

2024Q1 achieved a month-on-month decline in anode shipments, mainly affected by seasonal fluctuations in downstream demand. Single-ton profit (excluding graphitization) is estimated to increase slightly month-on-month, mainly due to profit restoration due to customer structural adjustments; diaphragm coating sales are expected to be at the level of 1 billion square meters or more, and single-flat profit estimates are stable month-on-month; base films achieved tens of millions of shipments, mainly used in the consumer sector; the profitability of the lithium battery equipment business remained stable, and the PVDF business contributed about 10 million profits. In addition, impairment losses of about 60 million yuan are mainly due to the anode business.

Looking forward to the future, Q2's anode shipments are expected to achieve 50% month-on-month growth, and the Sichuan base is expected to complete commissioning in Q2 and increase the profit level of one ton of anodes in the second half of the year; in addition, shipments and profitability of the diaphragm business remain stable, and power certification is rapidly progressing, and Q2 is expected to contribute new volume in the future; the rapid growth of overseas orders in the equipment business supports overall net profit; the composite copper foil business is expected to progress towards the end of Q2 and contribute to profit in the second half of the year. Looking at the full year, the company is expected to achieve net profit of 2.5 billion yuan in 2024, and continues to be recommended.

Risk warning

1. Market competition increases risk;

2. The risk that demand in the power battery industry falls short of expectations.