The company already has global competitiveness in the consumption of lithium batteries. The cylindrical lithium-ion battery business, which accounts for more than half of its revenue, has gradually recovered and is expected to be fully produced relatively quickly after terminals have been removed from inventory since 2022. There may be positive changes in price and profit levels in the future. The company's large battery business is still in the investment stage. Among them, the energy storage battery business already has a large scale and remains profitable at the bottom of the industry. As its capacity utilization rate continues to rise, the profit situation is also expected to gradually recover. The company is committed to global development, and its overseas customer revenue contribution will further increase. At the same time, the company's production capacity in Malaysia, Hungary, and the United States is expected to be launched one after another. Overall, the company's operations have ushered in some positive changes, and the certainty of future growth is also increasing.
The company's battery consumption quickly recovered. The company's consumer battery products include lithium primary batteries, SPC, small lithium ions, cylindrical lithium ions, etc., and the company maintains the first place in the country and leading the world in these fields. Among them, the cylindrical lithium-ion battery business, which accounts for more than half of the revenue, has gradually recovered and is expected to be fully produced soon after terminals have been removed from inventory since 2022. Since second-tier peers are already in a state of loss, we have analyzed that the price and profit level of this business may change positively in the future. The company's consumer batteries are globally competitive. Under the future major industry trend of electrification of terminal consumption, this business may be at a higher level.
The market share of energy storage batteries continues to rise, and profit contributions increase; the investment period for power business is slow first, then fast. The company is a catcher in the field of large batteries. After 10 years of continuous investment and iteration, power and energy storage batteries already have a certain scale and competitiveness. Currently, when most peers lose money, the company still achieved a profit of 2.x points/Wh. The company's energy storage battery customer structure is relatively good, accounting for more than 30% of direct overseas sales. The reputation and evaluation in the industry is quite positive, and its market share continues to increase. Along with the increase in the operating rate of the company's energy storage battery business, the profit situation is also expected to improve. The company shipped 26 GWh of energy storage batteries in '23. The current production capacity can support a large increase in shipments. After the company's Hubei Gigafactory and Yunnan base are put into operation, the scale and profit contribution of energy storage batteries will further increase. The company continued to invest in the power sector. It has basically completed card slots for various major routes such as square iron lithium, soft pack ternary, and 46 series large batteries, and has successfully obtained large orders from many high-end overseas companies. The company's power battery shipments reached 28 GWh in 2023, which is already on a certain scale. Following the launch of major European customers, the scale may rise to the next level.
A firm overseas layout. The company is committed to global development. The first phase of the Malaysian project has already started in 2023, and the first batch of cylindrical lithium-ion production lines is expected to be put into operation by the end of this year. The company's projects in Hungary and the US are progressing normally. It has signed a site agreement with the Hungarian government of Debrecen to build a large cylindrical lithium-ion battery base for passenger cars in Debrecen to meet the needs of major European car companies. In response to different policies, the company is also exploring joint ventures with three overseas companies, Daimler Truck, PACCAR, and Electrified Power, to build power battery production capacity in the US to serve the North American heavy truck market. The firm overseas layout of the company is expected to bring positive returns in the future.
Profit forecast and investment suggestions: The company's consumer electricity and energy storage batteries have ushered in positive business changes. In the medium to long term, the certainty of the company's subsequent growth is increasing. We maintain a “Highly Recommended” rating, adjusted profit forecasts, and gave a target price of 52-57 yuan.
Risk warning: Power customer development falls short of expectations, profitability of energy storage batteries falls short of expectations, overseas trade policy disturbances; risk of losses in investment and participating companies.