Event: The company publishes the 2023 Annual Report and the First Quarter 2024 Report. In 2023, the company's consolidated statements achieved a total operating income of 4.106 billion yuan, an increase of 7.52% over the previous year; net profit to mother was 644 million yuan, an increase of 113.28% over the previous year. 2024Q1 achieved operating income of 876 million yuan, a year-on-year decrease of 3.44%; net profit to mother was 86 million yuan, an increase of 27.14% over the previous year.
Performance was under pressure in the short term, and profitability was enhanced. By product, in 2023, electric heaters for household appliances, electric heaters for new energy vehicles, new energy equipment, optical communication steel, aluminum plastic composites, and lithium battery steel shell materials achieved revenue of 1,267 billion yuan/297 million yuan/1,963 million yuan/499 million yuan/44 billion yuan, compared with -3.02%/+22.58%/+34.64%/-30.76%/-22.59%, respectively; the main reasons are:
(1) The market for household appliances such as air conditioners, kitchen and bathroom appliances is fiercely competitive. (2) Demand in the consumer electronics sector is rising slowly, and orders in the power battery sector have fallen short of expectations; at the same time, there are many customers and long time to verify pre-plated nickel materials, and related costs are high;
In terms of profitability, in 2023, the company's gross sales margin was 23.56%, +3.39pct; the net sales margin was 15.72%, +7.77pct; the 2024Q1 gross sales margin was 23.69%, +4.41pct; the net sales margin was 9.80%, +2.33pct year on year; the main reason was that the company continued to improve quality management and control, accelerate the development of new energy businesses, and continue to increase its core competitiveness.
Demand for nickel-plated materials for short-term power batteries fell short of expectations, and we are waiting for 4680 batteries to be released. In terms of pre-plated nickel materials, Tesla officially announced in October 2023 that it would break through the 20 millionth 4680 battery cell; on January 25, 2024, it was announced that it will build 4 new 4680 battery production lines; in this context, Tesla, LG, Panasonic, and Samsung currently have relatively clear investment plans for large cylindrical power batteries and energy storage batteries; Ningde Era, Everweft Lithium, Wuxi Jinyang, China Innovation Aviation, Honeycomb Energy, BAK Battery, Guoxuan Hi-Tech and others are also laying out large cylindrical power batteries and energy storage battery businesses; Switzerland and many others New energy vehicle manufacturers have also indicated that they want to promote the terminal application of large cylindrical batteries. At present, the company's “pre-nickel-plated steel base belt project with an annual output of 20,000 tons of lithium batteries” has reached a state of use and is in a leading position in the industry. It has also passed material performance verification from many well-known domestic companies such as Kodaly, Everweft Lithium, and Wuxi Jinyang, etc., and has signed supply framework agreements with Wuxi Jinyang, Dongshan Precision, Haishida, Hikindumen, etc., and has delivered batches to customers such as Haishida and Hikindumen. In addition, the company is also actively developing business connections with well-known foreign NEV manufacturers. We believe that the technical threshold for pre-nickel-plated materials is high, and the customer certification cycle is also relatively long. In the next two to three years, the company will have a strong first-mover advantage. Against the backdrop of an increase in the penetration rate of large cylindrical batteries in the automotive sector, demand for pre-nickel-plated materials may increase dramatically as 46 series batteries are released, and the company, as a leading enterprise in the industry, is expected to fully benefit from the expansion of the industry.
Investment advice: Considering that the company's 20,000 ton lithium battery pre-plated nickel-plated steel base belt project has reached a usable state, is in a leading position in the industry, has passed material performance verification by many domestic companies, and has been supplied in batches. Therefore, against the backdrop of an increase in the penetration rate of large cylindrical batteries in the automotive sector, the company has a strong first-mover advantage, so it maintains a “buy” rating. We expect the company's net profit from 2024 to 2026 to be 501 million yuan, 584 million yuan, and 657 million yuan respectively; EPS will be 0.34 yuan, 0.40 yuan, and 0.44 yuan respectively; corresponding PE will be 14 times, 12 times, and 10 times, respectively; risk warning: risk of fluctuating raw material prices; risk of market demand for pre-plated nickel products falling short of expectations; increased industry competition; falling short of expectations; risk of changes in PV industry policy