Description of the event
The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 16.628 billion yuan, a year-on-year increase of 19.35%; net profit to mother was 1,775 billion yuan, a year-on-year decrease of 23.45%. 23Q4 achieved revenue of 3.442 billion yuan, a year-on-year decrease of 12.45%; net profit to mother - 549 million yuan. 24Q1 achieved revenue of 3.311 billion yuan, up 1.14% year on year; net profit to mother was 565 million yuan, up 0.21% year on year.
Incident comments
Prudent calculations led to a sharp decline in 23Q4 profits. Based on prudential principles, the company accrued credit impairment losses (main accounts receivable) of 408 million yuan and asset impairment losses (main inventory) of 330 million yuan in 23Q4; for the full year of 2023, it accrued asset reduction losses of 430 million yuan and credit impairment losses of 732 million yuan, totaling about 1.16 billion yuan, and a total of 590 million yuan for the full year of 2022. 23Q4's large prudential calculation led to losses. In addition, the management expense ratio and R&D expense ratio also increased in 2023. The above factors led to a year-on-year decline in net profit due to the above factors. Due to very careful calculation principles, follow-up accruals are expected to be reduced, and 24Q1 accounts have been significantly reduced; since most of the company's customers are top quality customers, the subsequent calculation is expected to be reversed. Furthermore, at the bottom of the industry cycle, after full calculation, the company will go to battle lightly, and the financial statements are expected to be gradually repaired.
Orders support 24-year results are expected to continue growing. In a situation where overall orders in the industry declined markedly in '23, the company achieved superior growth to the industry due to the growth of overseas and non-lithium batteries, the overall order decline was small. At the same time, the company has signed multiple orders since 24Q1, and it is expected that 24H1 orders will increase. Due to the increase in the share of overseas orders, the company's overall order execution cycle was lengthened. The 23Q4 and 24Q1 company's contract liabilities continued to reach new highs, 23Q4 inventory remained high, 24Q1 inventory continued to grow, and the company's on-hand orders were still growing, which is expected to support the continuous growth of the 24-year performance.
The share of overseas revenue increased. The lithium battery business accounted for 76% of revenue in 2023, a record high since 2020, but the share of non-lithium battery business orders increased in 2023, and the share of non-lithium battery revenue is expected to increase in 24. Overseas revenue accounted for 13.5% in '23, an increase of about 5 pct compared to '22. Among the new orders signed in '23, the share of overseas orders increased to 30%, including customers from Volkswagen, ACC, Japan, South Korea, North America, etc., as well as domestic overseas customers, all cooperated; the amount and share of overseas orders are expected to continue to rise in '24, becoming one of the main sources of the company's order growth in '24. The gross margin of overseas revenue in '23 was only 16.2%. The main reason is that German projects received in 2022 were affected by domestic emergencies, and overseas projects improved in '23, and gross margins were higher than domestic ones. It is expected that the gross margin of overseas revenue in the '24 report will increase significantly.
Profitability leads the industry. Under pressure from the industry cycle, the company's gross profit margin of 35.60% in '23 was still leading the industry, with a net profit margin of 10.65%, mainly affected by accruals. The 24Q1 gross profit margin was 36.78%, and the net profit margin was 16.6%, which remained high.
As the share of overseas order revenue increases in the future, the company's profitability is expected to remain high.
The company went overseas smoothly, and overseas orders continued to grow. Domestic orders also gradually stabilized with the support of the non-lithium battery business, waiting 24 years for the domestic cycle to reverse. There are plenty of on-hand orders and overseas sales, which will support growth in 2024 and 2025. After full planning, the company will launch lightly, making the company's subsequent profit release more secure. The company's net profit due to mother in 2024-25 is estimated to be 3 billion yuan and 3.7 billion yuan, respectively, and the corresponding PE is 11 and 9 times, respectively.
Risk warning
1. Downstream production expansion falls short of the expected risk;
2. Management risks caused by scale expansion.