Incident: The company released its 2024 quarterly report. The company achieved operating income of 4.52 billion yuan, -65.7%/-35.7%; net profit to mother of 159 million yuan, -43.6%/+308.7% YoY; deducted non-net profit of 152 million yuan, -43.1%/+523% YoY.
The operating rate reached 98% in March, and both volume and profit are expected to increase in Q2. 1) 2024Q1 shipped 136,000 tons, an increase of 33%. Nearly 60,000 tons were shipped in March 2024, with a capacity utilization rate of over 98%. It is expected that Q2 will continue to be fully produced. 2) A single ton deducted about 1,100 yuan for profit, which is a significant increase over the previous month. As capacity utilization increases in Q2, normalized single-ton deduction is expected to increase further. 3) On the price side, the price of lithium iron phosphate is expected to rise as demand recovers in the downstream car market and the gradual recovery in upstream lithium carbonate prices.
The production capacity side and profit side predict the industry's clearance trend. From the supply and demand side, the current level of lithium iron overcapacity has dropped to 20% from 48% in 2023; from the profit side, many companies in the industry have been losing money for several consecutive quarters, and we judge that the trend of liquidation in the past two years will be further evident.
Iron phosphate has achieved complete self-supply, and cost reduction can be expected to extend to the phosphate ore end. In 2023, the company achieved 100% self-supply of iron phosphate and continued optimization in terms of cost reduction. At present, the company has obtained 2 phosphate deposits in Guizhou, with a total deposit of about 50 million tons. The ore grade is high, and the prospecting rights cost 450,000 yuan. The company plans to use mined phosphate to meet its own demand for iron phosphate supply and shield upstream phosphate price fluctuations with lower capital expenditure.
The overseas lithium iron market is vast, and it is planned to invest 50,000 tons of lithium iron phosphate. In recent years, lithium iron materials have been favored by overseas markets, and we expect the global share of lithium iron to increase further. In order to support customers' overseas needs and expand overseas business, the company plans to invest in the construction of a lithium battery cathode material project with an annual output of 50,000 tons in Spain.
Investment advice: Considering the stable and excellent performance of the company's products and the binding, hedging and mine-side layout to reduce the risk of material price fluctuations, we expect the company's net profit to be 10/19/30 billion yuan in 2024-2026, corresponding to PE of 27/14/9 times, respectively, to maintain the “increase” rating.
Risk warning: Competition in the industry intensifies; downstream NEV sales fall short of expectations; upstream raw material prices have risen sharply; costs have risen above expectations.