Incidents. The company disclosed the 2023 annual report and the 2024 quarterly report: the company's revenue in 2023 was 16.628 billion yuan, +19.35% year on year; net profit to mother was $1,775 billion, -23.45% year on year; net profit after deducting non-return to mother was $1,725 million, or -23.57% year over year. Among them, 23Q4's revenue was 3.442 billion yuan, -12.45%; net profit to mother was 549 million yuan, -184.09% year-on-year; net profit after deducting non-return to mother was 558 million yuan, -187.83% year-on-year. 24Q1: The company's revenue was 3.311 billion yuan, +1.14% year on year, net profit attributable to mother was 565 million yuan, +0.21% year on year, net profit without return to mother was 551 million yuan, +0.01% year on year.
Accrued impairment and a temporary decline in gross margin hampered performance. According to the company's 2023 annual report: 1) The gross profit of overseas business was low in the second half of 2023, and the main overseas projects affected by the epidemic in the first half of the year confirmed revenue; 2) Accumulated impairment losses in 2023 rose to 1,162 billion yuan (430 million yuan in asset capital reduction losses and 732 million yuan in credit impairment losses), which further affected the company's profits.
Revenue from lithium battery equipment is growing steadily, and revenue from high-margin photovoltaic equipment is growing at a high rate. According to the company's 2023 annual report: 1) Lithium battery equipment: 2023 revenue of 12.642 billion yuan, +27.12% year on year, gross profit margin 38.69%, -0.35pct year on year. 2) Intelligent logistics system: 2023 revenue of 1,431 billion yuan, -15.55% year-on-year, gross profit margin 6.88%, year-on-year -12.17pct. 3) Supporting equipment for automated photovoltaic production:
Revenue in 2023 was $1,028 million, +121.85% YoY, and gross profit margin 16.78%. 4) 3C smart devices: 2023 revenue of 698 million yuan, +15.29% year-on-year, gross profit margin of 44.02%.
Gross profit margin was temporarily under pressure in '23, and gradually recovered in 24Q1. According to the company's 2023 annual report, the company's gross profit margin in 2023 was 35.60%, -2.15pct; the net profit margin was 10.65%, year-on-year -5.98pct, of which the gross export profit margin was 16.15%, or -3.69pct year on year. Among them, the 23Q4 company's gross profit margin was 26.28%, -16.81 pct year on year; net profit margin was -15.92%, or -32.51 pct year on year. According to the 2024 quarterly report, 24Q1's gross profit margin was 36.78%, -4.68pct year on year, +10.50pct month-on-month; net profit margin was 16.60%, -0.08pct year on year, and +32.52 pct month-on-month, and the profit level remained high.
The fee rate increased year over year in '23, and improved in 24Q1. According to the company's 2023 annual report, the company's sales expense ratio in 2023 was 2.71%, -0.24pct; the management expense ratio was 6.04%, +0.88pct; the R&D expense ratio was 10.08%, +0.41pct; and the financial expenses ratio was -0.24%, +0.23pct year on year. Among them, the 23Q4 company's sales expense ratio was 5.82%, +1.52pct; the management expense ratio was 8.96%, +3.57pct; the R&D expense ratio was 12.08%, +0.68pct; and the financial expense ratio was 0.53%, +0.53 pct year on year. According to the company's 2024 quarterly report, the 24Q1 sales expense ratio was 0.47%, -1.27pct; management expenses ratio was 9.25%, +2.60pct; R&D expenses ratio was 11.74%, -1.25pct; financial expenses ratio was -1.38%, year-on-year.
Inventories and shipments continued to grow, which indicates sufficient orders. According to the company's 2022, 2023 annual report and 2024 quarterly report: 1) At the end of the 2022/2023/2024Q1 period, the company's inventory was about 124/132/143 billion yuan (of which products issued in 2022/2023 were $72/86 billion yuan, respectively), and contract liabilities were 101/126/14 billion yuan respectively. Maintaining growth reflects that the company has sufficient on-hand orders, and there is some guarantee on the revenue side.
We expect overseas business to become a new growth point, and photovoltaic equipment & composite copper foil equipment will open up room for growth. 1) Lithium battery equipment:
According to the company's 2023 annual report, the company maintains good cooperative relationships with many first-tier lithium battery companies and car companies around the world, and has accumulated rich experience in the lithium battery equipment industry. We believe that the company is expected to fully benefit from the expansion of overseas lithium battery production. 2) Photovoltaic equipment: According to the company's 2023 annual report, the company has a layout of photovoltaic cell end equipment and equipment for photovoltaic modules in the fields of TopCon, XBC, perovskite, etc. According to the company's official WeChat account, recently, the company's XBC full-process equipment successfully achieved full production at leading customer sites in the industry, and received customer approval and additional orders. As of September 8, 2023, the company has received more than 2 billion yuan+XBC equipment orders. 3) Composite copper foil equipment: As the composite collector production process gradually matures, the industrialization process of composite fluid collector is expected to accelerate. According to the company's WeChat account, the company has now launched an innovative composite fluid collector manufacturing solution, and related equipment has now received customer orders; in addition, the “magnetron sputter+water electroplating” innovative solution launched by the company has effectively improved foil yield and equipment utilization rate, and has been highly recognized by customers.
Profit forecasting and valuation. In view of the slowdown in the expansion of production in the downstream lithium battery industry, the company's lithium battery intelligent equipment business may be under pressure. As a result, we lowered the company's profit forecast for 2024 and 2025, and added a profit forecast for 2026. We expect the company to achieve net profit of 32.76/37.57/4.450 billion yuan in 2024/2025/2026 (the original 2024-25 forecast was 43.18/5,033 billion yuan) and EPS was 2.09/2.40/2.84 yuan/share, respectively. Considering that the company is a leading lithium battery equipment company, overseas exports and new fields continue to grow, which is expected to open up some room for growth. At the same time, with reference to comparable company valuations, we will give the company a PE valuation of 15 times 2024 (originally 16x in 2023), below The target price was adjusted by 13% to 31.38 yuan/share, with a reasonable market value of 49.1 billion yuan, maintaining the “superior to the market” rating.
Risk warning. Downstream power battery production expansion falls short of expectations, risk of impairment such as inventory and credit, the company's overseas expansion progress falls short of expectations, business development such as photovoltaic equipment & composite copper foil equipment falls short of expectations, etc., and the company's performance falls short of expectations.