Key points of investment

Incidents:

According to the announcement, the company achieved operating income of 16.6 billion yuan in 2023, an increase of 19% over the previous year; net profit to mother was 1.8 billion yuan, a decrease of 23% over the previous year. The first quarter of 2024 achieved operating income of 3.3 billion yuan, an increase of 1% year on year; net profit to mother was 600 million yuan, the same as the first quarter of 2023.

Overseas business revenue grew rapidly in 2023, and is expected to go light in 2024 after accounting for impairment losses

The company's revenue in 2023 was $16.6 billion, up 19% year over year. Among them, lithium battery equipment is 12.6 billion yuan, intelligent logistics equipment is 1.4 billion yuan, photovoltaic equipment is 1 billion yuan, and 3C equipment is 700 million yuan, which was 27%, -16%, 122%, and 15%, respectively. In 2023, domestic business revenue was 14.4 billion yuan, up 13% year on year; overseas business revenue was 2.2 billion yuan, up 88% year on year. The company's net profit in 2023 was 1.8 billion yuan, down 23% year on year, mainly hampered by the fourth quarter. Net profit attributable to mother for the fourth quarter of 2023 was -550 million yuan, mainly due to the weak boom in the domestic lithium battery industry and the extension of the repayment cycle. In the fourth quarter of 2023, asset impairment losses totaled 330 million yuan, accruing credit impairment losses of 410 million yuan.

The actual controller increased its holdings by 150 million yuan, and the company has repurchased a total of 350 million yuan, demonstrating confidence in development (1) According to the announcement, Mr. Wang Yanqing, the actual controller, chairman and general manager of the company, plans to increase his holdings of the company within 6 months from October 30, 2023, to increase his holdings by 150-300 million yuan. As of April 29, the total increase in holdings reached 150 million yuan, and the average increase price was 25.32 yuan/share. (2) On December 13, 2023, the company deliberated and approved an increase in the total share repurchase amount to 350-500 million yuan. As of April 30, the repurchase amount reached 350 million yuan.

Continuing to develop new orders, demand for equipment such as energy storage lithium batteries, overseas power lithium batteries, and photovoltaics is booming1. Overseas markets. The domestic power lithium battery industry is ahead of overseas. As demand in the domestic lithium battery market becomes close to saturation, overseas markets are expected to become an important driving force for lithium battery equipment companies. The company has good relationships with overseas lithium battery companies such as Volkswagen, ACC, and Northvolt, and is expected to continue receiving overseas orders.

2. Energy storage market. According to the annual strategy, we forecast that the global energy storage lithium battery equipment market will be 25.7 billion yuan in 2023, with a year-on-year growth rate of 100%, accounting for 13% of the total demand for lithium battery equipment, which is expected to increase by 5 pct from 2022.

3. Automakers build their own batteries. OEMs such as Geely (Zhejiang Hengyuan), GAC (Inpai Battery), Chery, and NIO have all announced plans to build their own batteries, and emerging lithium battery companies will still bring some demand for lithium battery devices.

Committed to building a non-standard automation equipment platform enterprise, the non-lithium battery equipment business is expected to flourish. The company covers nine major businesses (lithium battery equipment, photovoltaic equipment, 3C equipment, automobile production lines, intelligent logistics, hydrogen energy equipment, laser processing equipment, capacitor equipment and smart factory solutions). It is expected that advanced R&D and management experience will be replicated in various fields and become a leader in non-standard automation equipment.

Profit forecasting and valuation

The company's net profit for 2024-2026 is estimated to be 3.68 billion yuan, 45.6, and 4.91 billion yuan, respectively, with year-on-year growth rates of 107%, 24%, and 8%, respectively, corresponding to PE 9, 7 times, and 7 times, respectively. Maintain a “buy” rating.

Risk warning: Lithium battery companies' expansion of production fell short of expectations; new business expansion fell short of expectations.