Description of the event

The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved revenue of about 1,404 billion yuan, a year-on-year decrease of 23.75%, and realized net profit of 297 million yuan, a year-on-year decrease of 29.96 million yuan, a year-on-year decrease of 47.31%; of these, 2023Q4 achieved operating income of 346 million yuan, a year-on-year decrease of 13.35%, and net profit of 136 million yuan, a year-on-year increase of 40.67%. In 2024Q1, the company achieved operating income of about 307 million yuan, a year-on-year increase of 10.19%, and net profit to mother of about 54 million yuan, an increase of 35.38% over the previous year, after deducting non-net profit of 52 million yuan, an increase of 59.35% over the previous year.

Incident comments

Looking at 2023, on the shipping side, carbon nanotube conductive paste and carbon nanotube powder were shipped 55,000 tons and 98.5 tons respectively, up 17.6% and 144.3% year-on-year respectively, accounting for 46.7% of the domestic market share in 2023. On the revenue side, the revenue of carbon nanotube conductive paste and carbon nanotube powder was 1.36 billion yuan and 111 million yuan respectively. It is estimated that the unit price of the product fell relatively high year on year, mainly due to the decline in upstream material prices, compounded by product sales restructuring, and sales revenue declined compared to the same period last year. In 2023, the company's expense ratio was 15%, up 4.6pct year on year. Among them, the sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 1.1%, 5.0%, 6.8%, and 2.2%, respectively, with year-on-year increases of 0.2 pct, 2.0 pct, 2.0 pct, and 0.4 pct, respectively. In the end, the company achieved net profit of 297 million yuan, a significant year-on-year decline. Single-ton profit in 23Q4 increased slightly month-on-month. Among these, the non-recurring profit and loss was mainly due to the transfer of shares in Xinna Environmental Protection.

2024Q1's revenue increased 10.2% year over year, and the shipping side is expected to continue growing month-on-month. In terms of profit, the company's 24Q1 gross margin was 34.45%, up 3.4 pcts year over year. In terms of costs, the cost rate during the 2024Q1 period was 15.0%, down 1.2 pct year on year, and basically flat from month to month. Among them, the R&D cost rate was 5.7%, up 1 pct from month to month. In the end, 24Q1 achieved net profit of about 54 million yuan, an increase of 35.38% over the previous year. Among them, profit per ton still declined, mainly due to changes in customer structure.

In terms of other financial indicators, the company achieved a net operating cash flow inflow of about 300 million yuan in 2023, a significant increase over 2022; 2024Q1 achieved a net operating cash flow inflow of about 68 million yuan. In terms of capital expenditure, capital expenditure in 2023 was about 590 million yuan, a year-on-year increase; 2023Q1 capital expenditure was about 160 million yuan, confirming the company's active production capacity layout. The Changzhou base is expected to be put into operation in the first half of the year, and the US and European bases are progressing smoothly.

We continue to be optimistic that the company, as the global leader in carbon nanotube conductive agents, can follow the lithium battery industry to achieve continuous rapid growth. The company's net profit attributable to shareholders of the parent company in 2024 is estimated to be about 310 million yuan, which is about 34 times the corresponding valuation. Maintain a “buy” rating.

Risk warning

1. The risk of a downturn in industry sentiment;

2. The risk that profitability falls short of expectations due to increased competition in the industry.