Core views

In 2023, the company achieved revenue of 8.73 billion yuan, -38% year-on-year, net profit of 1.23 billion yuan, -264%; 2024Q1 achieved revenue of 1.47 billion yuan, -30% year-on-year, -34% month-on-month, and net profit of -78 million yuan, +65% year-on-year and +85% month-on-month.

In 2023, the effective production capacity of the company's lithium iron phosphate cathode was 200,000 tons, with sales volume of 108,000 tons, +14% over the same period. The company's capacity utilization rate was damaged during the climbing period, compounded by a sharp drop in lithium prices, which resulted in significant asset impairment losses, which put pressure on profits. The infrastructure for Indonesia's 30,000 ton lithium iron phosphate project has also been completed, and it is expected to be put into operation by the end of 2024Q2.

occurrences

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

In 2023, the company achieved revenue of 8.73 billion yuan, -38% year-on-year, net profit of 1.23 billion yuan, -264% year-on-year, net profit after deducting net profit of 1.24 billion yuan, -279% year-on-year; of these, 2023Q4 revenue was 2.24 billion yuan, -46% year-on-month, -16% month-on-month, -51 million yuan year-on-year, -1232% month-on-month, -294% month-on-month.

2024Q1 achieved revenue of 1.47 billion yuan, -30% year-on-year, -34% month-on-month, net profit of -78 million yuan, +65% year-on-month, +85% month-on-month, net profit of 110 million yuan after deducting net profit from mother, +55% year-on-year, and +74% month-on-month.

Brief review

Lithium iron phosphate cathode business: A long-term agreement was signed with LGES, and the Indonesian plant continues to advance.

In terms of production capacity, the company's lithium iron phosphate cathode has an effective production capacity of 200,000 tons in 2023, including the 50,000 ton lithium iron phosphate and 100,000 ton iron phosphate project in Shandong, the 50,000 ton lithium iron phosphate and 50,000 ton iron phosphate project in Hubei, and the 5,000 ton ternary precursor project for trigold lithium batteries have been basically completed, and some production lines are in the climbing stage; the 40,000 ton lithium carbonate project in the Yichun Longpan Era is expected to reach the intended use state by the end of June 2024; the infrastructure of the 30,000 ton lithium iron phosphate project in Indonesia is also expected to be put into operation at the end of 2024Q2.

In terms of sales, the company sold 108,000 tons of lithium iron phosphate cathodes in 2023, +14% year over year, and 2024Q1 sold 26,600 tons, +120% year over year.

On the customer side, it currently includes mainstream domestic and foreign battery manufacturers such as Ningde Times, Ruipu Lanjun, Sunwoda, Wuhan Chuneng, and LGES. Among them, the company signed a memorandum of understanding with LGES to jointly operate a lithium iron phosphate cathode material plant in Indonesia; in February of this year, the company signed a 5-year long-term supply agreement with LGES to achieve deep binding.

In terms of price, the company's lithium iron phosphate cathode revenue in 2023 was 6.75 billion yuan, corresponding to an average price of 62,500 yuan/ton, -46% year-on-year, mainly due to a sharp drop in lithium prices and a decline in processing costs.

In terms of profit, the company's lithium iron phosphate cathode gross profit margin was -7.8% in 2023, mainly due to damage to capacity utilization during the company's production capacity climbing period. Combined with a sharp drop in lithium prices, a large amount of asset impairment losses was calculated, which put pressure on the company's cathode business profit. It is expected that in 2024, profits will recover year-on-year as the company's shipments increase, capacity utilization increases, and lithium prices stabilize.

Traditional business: growing year by year, stable profit. In 2023, the company's automotive environmentally friendly fine chemicals business revenue was 1.90 billion yuan, +8% year-on-year, gross profit margin 27.0%, and +2.1pct year-on-year. Overall, it maintained steady growth.

Profit forecast: The company's net profit is expected to be 120 to 240 million yuan in 2024 and 25, corresponding to 41 or 21 times PE. Considering that the overall processing costs for lithium iron phosphate cathode links will be at the bottom this year, the profitability of the industry and companies will continue to be under pressure, giving the company an “increase in weight” rating.

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 progress of the company's key projects falls short of expectations: As a participant in the new energy circuit, the promotion of key projects such as Indonesian factory construction and cooperation with LGES is the key to supporting revenue and profits. It is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term results.

4) Risk of performance falling short of expectations: In 2023, due to a sharp drop in lithium prices and a phased imbalance between supply and demand in the industry, the company's profitability was under pressure. The industry was still at the bottom in the first half of this year, and there is a risk that performance will fall short of expectations.