Investment events
(1) In 2023, the company achieved operating income of 8.709 billion yuan, a year-on-year increase of 28.87%; net profit to mother was 468 million yuan, an increase of 131.76% over the previous year; and plans to distribute a cash dividend of 0.5 yuan (tax included) for every 10 shares to all shareholders.
(2) In the first quarter of 2024, the company achieved revenue of 1,947 billion yuan, an increase of 2.04% over the previous year; net profit to mother was 78.45 million yuan, a year-on-year decrease of 24.25%.
Key points of investment
Higher year-on-year performance in 2023, and gross margin increased
In 2023, the company's net profit to mother was 468 million yuan, up 131.76% year on year, with a gross profit margin of 16.50%, up 2.32 percentage points year on year. Mainly due to the continuous increase in production and sales volume in the automotive modified materials business, sales revenue achieved significant growth, leading to a recovery in gross margin. Since September 2022, Highstar was included in the scope of the merger, and the company's performance at the end of 2023 included the full year's performance of Highstar Power, so the company's net profit increased dramatically.
ICT materials: Seize LCP application opportunities and actively carry out market development and order execution According to IDC forecasts, consumer ICT spending is recovering, and the terminal market will hit bottom and rebound in 2024, which will drive the downstream precision parts market's demand for the company's LCP composites to increase. By the end of 2023, the company has received small-batch purchase orders from many customers, and is expected to achieve mass production and sales in 2024. As the 5.5G/millimeter wave base station layout progresses, it will accelerate the application of the company's LCP fiber products in base station PCBs, and we expect the LCP business to become a new performance growth point for the company in the future.
Lithium battery: Signed a sales contract, lithium battery production capacity expansion creates a second growth curve. The company currently has a new energy battery production capacity of 5.3 GWh and a production capacity under construction of 10 GWh (compatible to produce sodium/lithium ion batteries). Of these, 4 GWh at the Qidong base and 6 GWh at the Zhuhai base will be gradually put into operation in the second and third quarters of 2024. In May 2024, the subsidiary Jiangsu Highstar Power signed a contract with Shanghai Hirano Environmental Technology to purchase and sell 1.5 GWh sodium batteries, which are scheduled to be delivered in batches from 2024 to 2026. With the commissioning of new production capacity and the expansion of downstream applications, Highstar Power will rapidly expand industrial customer coverage and enhance battery production and industry status through products such as small power batteries, lithium iron phosphate energy storage batteries, and sodium-ion batteries.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. Considering the intensification of competition in the industry and the decline in product prices, we carefully lowered the company's net profit due to mother in 2024-2025 to 537 million yuan and 796 million yuan (before the reduction, it was 829 million yuan and 1,058 million yuan, respectively), and the 2026 forecast was 933 million yuan, corresponding EPS was 0.48, 0.71, and 0.84 yuan, respectively, and the corresponding PE was 21, 15, and 12 times. Maintain a “buy” rating.
Risk warning
LCP business expansion falls short of expectations, fluctuating material costs, and increased competition risks.