Aoyama Industrial's lithium battery company has rapidly expanded its production capacity in recent years. Ruipu Lanjun Energy Co., Ltd. was established in October 2017. It is an important core enterprise of Qingshan Industrial in the field of new energy. It is mainly engaged in R&D, production and sales of lithium-ion batteries. Its products are mainly used in new energy vehicles, energy storage and other application terminals. The company achieved batch delivery of lithium batteries in April 2019 and was listed on the Hong Kong Stock Exchange in December 2023, raising HK$2,013 billion to expand production capacity.
The main business is the production and sales of energy storage and power batteries, and the product line continues to expand. By the end of 2023, the company's total design capacity was 62 GWH, and the company's sales volume for the full year of 2023 was 19.48 GWh, up 17.28% year on year, with power battery shipments of about 5.2 GWh, down 15.17% year on year. According to Power Battery Alliance data, the company's power battery load ranked 11th in the country, down one place from 2022; energy storage battery shipments were about 14.28 GWh, up 36.26% year on year. According to SNE data, the company's energy storage battery installed capacity ranked fourth, up one place from 2022.
The battery business volume increased and fell in 2023, and overseas revenue increased significantly. In 2023, the company achieved revenue of 13.763 billion yuan, a year-on-year decrease of 6.12%; of these, battery products achieved revenue of 11.29 billion yuan, a year-on-year decrease of 13.4%. The company's installed capacity in 2023 was 19.48 GWh, with an average sales unit price of 0.58 yuan/GWh, down 26.2% from 2022. The increase in sales volume did not offset the weakening profit caused by falling prices in the industrial chain. The company's overseas sales in 2023 (including Hong Kong, Macao and Taiwan) were 1.05 billion yuan, up 5.25 times year on year, and other business revenue was 2,456 billion yuan, up 53.11% year on year. In 2023, sales revenue to Qingshan Industrial related companies was 2,016 billion yuan, accounting for about 14.65% of total revenue.
The company's profitability weakened, and the gross margin of power batteries turned negative. In terms of profitability, the company's overall gross profit margin in 2023 was 2.23%, down about 5.3 pcts from 2022, and gross profit fell from 800 million yuan to 190 million yuan, down 78% year on year. By sector, the gross margin of power batteries fell from 3.1% in 2022 to -3.1%, in a state of loss; the gross margin of energy storage batteries fell from 8.7% in 2022 to 4.7% in 2023. In 2023, the company's net profit loss to mother further increased to 1,472 million yuan. Compared with the loss of 352 million yuan in the same period in 2022, profitability further weakened.
Profit forecast and investment advice: We expect the company's main revenue for FY24-26 to be 150.25/ 257.49/40.737 billion yuan respectively, corresponding net profit of -21.61/-25.86/ -1.925 billion yuan, and corresponding EPS of -7.04/-8.42/-6.27. Since the company was founded in a period of capacity expansion and profitability has not yet been achieved, we used the industry average net market ratio for valuation. As of May 24, 2024, the net market ratio of the Wind Lithium Battery Index was 2.7. Based on 2.7, our target price was HK$14.77 per share, which covered the “neutral” rating for the first time.
Risk warning: 1. New energy promotion falls short of expectations; 2. Global energy policy changes are lower than expected; 3. Demand for lithium batteries is lower than expected.