Investment events

1) In 2023, the company achieved revenue of 4.908 billion yuan, a year-on-year decrease of 6.64%; net profit to mother was 0.42 billion yuan, a year-on-year decrease of 88.55%; net profit not attributable to mother was 93 million yuan, a year-on-year decrease of 79.67%.

2) In the first quarter of 2024, the company achieved revenue of 1,066 billion yuan, a year-on-year increase of 2.38%; net profit to mother of 0.24 million yuan; net profit after deducting non-return to mother of 0.33 million yuan.

Key points of investment

Industry inventory removal compounded competition intensified, putting pressure on company performance

(1) In 2023, the company achieved revenue of 4.908 billion yuan, a year-on-year decrease of 6.64%; net profit of 0.42 billion yuan, a year-on-year decrease of 88.55%; net profit without return to mother was 93 million yuan, a year-on-year decrease of 79.67%, mainly due to multiple factors such as fluctuations in the downstream NEV market and inventory removal by industry companies. In addition, the market competition intensified the decline in the price of anode material products. In addition, the company's large inventory scale faced cost pressure. (2) In the first quarter of 2024, the company achieved revenue of 1,066 billion yuan, an increase of 2.39% over the previous year; net profit to mother of 0.24 million yuan; net profit after deducting non-return to mother of 0.33 million yuan.

Rich customer resources, high shipment growth, and smooth overseas progress. The company has accumulated many customer channels with excellent independent R&D capabilities, fine quality control systems and rapid market response mechanisms. In the lithium battery anode business, it has good and stable cooperation with well-known domestic lithium battery manufacturers such as BYD, Ningde Era, China Innovation Aviation, Everweft Lithium Energy, Ruipu Lanjun, Honeycomb Energy, ATL, etc., and has entered overseas markets. Korea's SkON and LGES all achieved batch delivery, achieving 145,000 tons of anode materials in 2023, an increase of 20.11% over the previous year. In 2024, the company will steadily advance the planning and construction of the first phase of the Yunnan Zhongke Xingcheng Anode Material Integration Project with an annual output of 100,000 tons and Morocco's 100,000 lithium-ion battery anode material integration base project, and is committed to becoming a green intelligent demonstration factory with low emissions, low energy consumption, low cost, high efficiency and high safety.

Leading high-end electromagnetic metallurgy special equipment, optimizing product categories and application scenarios The company's magnetoelectric equipment division achieved revenue of 389 million yuan in 2023, an increase of 30.24% over the previous year. With a complete product line, leading technology and stable and reliable product quality, the company has obvious advantages in the industry. The market share of special equipment for electromagnetic metallurgy exceeds 60%, and its leading position in the country is stable. The company has grasped the market opportunities for new productivity capacity replacement and energy saving and environmental protection, increased the R&D and promotion of high-end electromagnetic metallurgy special equipment, accelerated the execution and progress of major projects, and optimized the development of categories and industrialized applications of lithium battery automated electrical control equipment, lithium battery material demagnetization equipment, vertical high temperature reactors, and a new generation of fully automatic intelligent graphitization furnaces.

Profit forecasting and valuation

The profit forecast was lowered and the “buy” rating was maintained. The company is a leading manufacturer of lithium battery anodes, and it continues to reduce costs and increase efficiency and is progressing smoothly overseas. Considering the phased decline in profit due to the release of production capacity in the lithium battery anode industry, we lowered the company's profit forecast for 2024-2025. The company's net profit for 2024-2025 is estimated to be 3.35 billion yuan and 460 million yuan (996 million yuan and 1,314 million yuan respectively before the reduction), and the net profit forecast for 2026 is 654 million yuan, corresponding to EPS of 0.46, 0.64, and 0.90 yuan/share. The PE corresponding to the current stock price is 21, 15, and 11 times, respectively. Maintain a “buy” rating.

Risk warning

Technology iteration and emerging technology route substitution risks; raw material fluctuations and inventory risks; further intensification of market competition leading to price declines.