The company released the 2023 annual report and the 2024 quarterly report, achieving profits of 527 million yuan/111 million yuan respectively. Shipments of the company's cathode materials picked up significantly in 24Q1, and new products are expected to be released; maintaining an increase in holdings rating.

Key points to support ratings

The 2023 performance declined 52.93% year on year: the company released its 2023 annual report, achieving full year revenue of 17.311 billion yuan, a year-on-year decrease of 39.79%; realized profit of 527 million yuan, a year-on-year decrease of 52.93%; deducted non-profit of 466 million yuan, a year-on-year decrease of 52.44%. The company previously released a quick performance report and is expected to achieve a profit of 531 million yuan in 2023, a year-on-year decrease of 52.64%. The company's performance is in line with forecasts.

Shipments increased quarterly, and profits were under pressure: In 2023, against the backdrop of pressure on the industry, shipments declined, achieving annual sales of 72,000 tons of lithium battery cathode materials, of which 34,600 tons of lithium cobalate were sold, up 4.15% year on year; sales of ternary materials were 37,400 tons, a decrease of 19.39% year on year.

With the gradual introduction of new projects from new customers, sales of ternary materials increased quarter by quarter and returned to a good level by the fourth quarter. By product, lithium cobalate achieved revenue of 8.863 billion yuan, a year-on-year decrease of 38.31% and a gross profit margin of 8.45%, an increase of 1.76 percentage points; ternary materials achieved revenue of 7.755 billion yuan, a year-on-year decrease of 43.21%, and a gross profit margin of 6.86%, a year-on-year decrease of 3.35 percentage points.

2024Q1's performance was impressive, and shipments increased significantly: the company released its 2024 quarterly report, and achieved profit of 111 million yuan in 2024Q1, a decrease of 3.71% year over year and a decrease of 3.28% month on month; after deducting non-profit, 103 million yuan, up 4.28% year on year and 5.32% month on month. In the first quarter of 2024, the company continued to consolidate the market share of lithium cobalate and explore the ternary materials market. Sales volume increased significantly year on year. Among them, ternary materials sold 15,900 tons, up 249.47% year on year, and sold 0.84 million tons of lithium cobalate, up 62.5% year on year.

Actively laying out new technology products, which are expected to be released in the future: the company will continue to promote product upgrades, lead the high voltage and high power performance of lithium cobalate, focus on ternary materials with high voltage, high power, and high nickel, and achieve initial mass production of solid state battery cathode materials. New technology products are expected to be released in the future, boosting the company's performance growth.

valuations

Considering the intensification of industry competition and the sharp decline in raw material prices, etc., we adjusted the company's 2024-2026 earnings forecast to 1.30/1.69/2.14 yuan (the original forecast for 2024-2026 was 3.31/4.39/- yuan), corresponding to a price-earnings ratio of 30.0/23.1/18.2 times; maintaining an increase in holdings rating.

The main risks faced by ratings

Demand in the industrial chain fell short of expectations; raw material prices fluctuated unfavourably; NEV industry policies fell short of expectations; NEV products fell short of expectations.