Core views

In 2023, the company achieved revenue of 34.27 billion yuan, +13% year on year, net profit of 1.95 billion yuan, +26% year on year; 2024Q1 achieved revenue of 9.29 billion yuan, +18% year over month, +15% month on month, and net profit to mother of 380 million yuan, +11% year on month and 32% month on month. In terms of volume, the company sold 273,000 tons of cathode precursor materials in 2023, +26% over the same period last year, with a market share of 27% for tertiary precursors, ranking first in the industry. On the positive side, the company accounted for a high proportion of international customers in 2023, actively building an integrated industrial chain from laterite nickel ore to high-nickel ternary precursors, and its profitability remained stable.

occurrences

The company released its 2023 annual report and 2024 quarterly report.

In 2023, the company achieved revenue of 34.27 billion yuan, +13% year-on-year, net profit of 1.95 billion yuan, +26% year-on-year, and net profit of 1.59 billion yuan after deduction, +43% year-on-year. Among them, 2023Q4 achieved revenue of 8.08 billion yuan, +0.3% YoY, -9% month-on-month, net profit of 560 million yuan, +22% YoY, -9% month-on-month, net profit of 460 million yuan after deducting net profit not returned to mother, +40% YoY, and -13% YoY.

2024Q1 achieved revenue of 9.29 billion yuan, +18% year-on-year, +15% month-on-month, net profit of 380 million yuan, +11% year-on-month, -32% month-on-month, minus 340 million yuan, +35% year-on-month, and -25% month-on-month.

Brief review

In terms of production and sales, the company's output of cathode precursor materials in 2023 was 284,000 tons, +22% year over year, and sales volume was 273,000 tons, +26% year over year. Of these, Q4 is expected to be -15% month-on-month, mainly due to downstream warehousing and the low season of demand for Q1 terminals. It is expected that Q1 will remain basically flat from month to month. In 2023, the company's share of the market share of tertiary precursors was 27%, ranking first in the industry.

In terms of production capacity, at the end of 2023, the company built a three-phase precursor with a production capacity of nearly 400,000 tons/year, cobalt tetroxide production capacity of 25,000 tons/year, and iron phosphate production capacity of 200,000 tons/year; on the resource side, the crude refining end of the company's nickel resources under construction and construction reached 195,000 metal tons.

On the customer side, the company has fully entered the world's leading lithium battery industry chain and established a global core customer system. Downstream customers include Tesla, Samsung SDI, LG Chemical, China Innovation Aviation, Ningde Times, SK On, Honeycomb Energy, Panasonic, Dangsheng Technology, Xiamen Tungsten Industry, Betray, Bamo Technology, L&F, Zhenhua New Materials, Rongbai Technology, ECOPRO, POSCO and other top domestic and foreign customers, among which they have signed strategic cooperation agreements or long-term supply contracts with Tesla, LG Chemical, Xiamen Tungsten Xinneng, Dangsheng Technology, Betray, Ruipu Lanjun, China Innovation Airlines, etc.

In terms of profitability, the company's gross profit margin was 13.9% in 2023, +2.4 pct year on year, 13.5% gross profit margin on 2024Q1, and +2.3 pct year on year. The year-on-year improvement was mainly due to scale effects and the contribution of the integrated resource-side nickel layout. Based on the net profit scale to the mother, the company's profit per ton of precursor materials in 2023 was 70,000 yuan/ton, the same as the previous year; 2024Q1 is expected to make a profit of 0.55 million yuan/ton per ton. The month-on-month decline is mainly due to an increase in profit and loss for minority shareholders. Based on the net profit scale, the profit per ton is basically flat month-on-month, and the company's profitability remains stable.

In terms of resource allocation, the company is actively building an integrated industrial chain from laterite nickel ore to high nickel ternary precursors. The company actively promotes nickel smelting capacity investment at four overseas bases in Morowali, Weidabe, South Kalimantan, and North Morowali in Indonesia, as well as the domestic Tongren industrial base, Ningxiang industrial base, and Qinzhou industrial base, to achieve refining of various nickel raw materials such as nickel powder/beans, low ice nickel, high ice nickel, and MHP, and the layout is integrated from the resource side to the material side.

Profit forecast: The company's net profit for 2024-25 is estimated to be RMB 18.01 and 2.32 billion, corresponding to 19 or 15 times PE.

Risk analysis

1) Downstream NEV production and sales fall short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, power restrictions, etc., which in turn affects the company's related business shipments and profitability.

2) The rise in raw material prices exceeded expectations: Since 2021, raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, while at the same time disrupting the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.