Description of the event

The company released its 2024 quarterly report, achieving revenue of 4,013 billion yuan, a year-on-year decrease of 24.87%, and net profit to mother of 751 million yuan, a year-on-year decrease of 24.41%.

Incident comments

Short-term fluctuations in demand led to a decline in the company's revenue performance, but the quality of operations continued to improve, and the profit level steadily increased.

Due to fluctuations in the pace of downstream demand, 2024Q1's revenue fell 24.87% year on year to 4,013 billion yuan, and net profit to mother fell 24.41% year on year to 751 million yuan. However, the overall quality of the company's operations continued to improve, with gross margin rising to 35.55% month-on-month, and net margin rising sharply to 19.79% month-on-month.

The company achieved remarkable results in improving quality and efficiency in cost management. Improving the quality of inventory and accounts receivable management led to a year-on-year decrease in traction credit and asset impairment losses. 2024Q1's sales expenses decreased by 42.03% year on year to 73 million yuan, and management expenses decreased by 46.87% year on year to 186 million yuan. The main reason was that the company achieved remarkable results in improving quality and efficiency, which led to a year-on-year decrease in the overall cost ratio during the period. At the same time, the quality of the company's inventory and accounts receivable management improved, and the overall scale of impairment decreased year-on-year.

Inventories are at a high level to guarantee the release of short-term demand, and a significant increase in production capacity indicates confidence in development. The company's inventory balance at the end of the 2024Q1 period increased to 4.481 billion yuan compared to the beginning of the period. When downstream demand is released, short-term growth can be guaranteed. The company's balance of projects under construction at the end of the 2024Q1 period increased to 2,034 billion yuan compared to the beginning of the period. Continued significant expansion indicates that the company is full of confidence in medium- to long-term development.

Profit forecast and valuation: The company is expected to achieve net profit of 41.6, 525, and 6.63 billion yuan in 2024-2026, with year-on-year growth rates of 25%, 26%, and 26%, respectively. Corresponding to the market value on April 26, 2024, PE is 17, 14, and 11 times, respectively.

Risk warning

1. Demand is not issued in a timely manner;

2. The risk of production capacity expansion falling short of expectations.