Incident: Enjie Co., Ltd. released its 2023 annual report and 2024 quarterly report. The company's 23 year revenue was 12 billion yuan, down 4%; net profit due to mother was 2.5 billion yuan, down 37%; non-net profit was deducted from 2.46 billion yuan, down 36%; of these, 23Q4 revenue was 2.9 billion yuan, down 11%, net profit attributable to mother was 400 million yuan, the same decrease of 52%, after deducting non-net profit of 410 million yuan, the same decrease of 44%. 24Q1 revenue was 2.3 billion yuan, down 9%; net profit attributable to mother was 160 million yuan, down 76%; after deducting non-net profit of 150 million yuan, the same decrease of 76%. Mainly, diaphragm profits were under pressure. At the same time, the company accrued large bonuses in Q1.
Unit profits are under pressure, and shipments are still maintaining high growth in the industry.
The company's 23/24Q1 net profit is expected to be about 0.45/0.15 yuan/square meter. The company's profit pressure in '23 was due to a decline in prices in the mismatch between supply and demand, and the company's operating rate declined. Q1 '24 is the traditional low season. At the same time, the company's production line maintenance combined with price reduction and concession strategies were implemented, and overall profits continued to be under pressure.
We expect the company to ship a total of 2.5 billion square meters of 23Q4+24Q1 diaphragms, including 49.5, 12.5, and 1.25 billion square meters of 23/23Q4/24Q1 A films, an increase of 5/4/25%, respectively, and a steady increase in shipments.
Single-line production capacity exceeded 100 million square meters, and overseas customers accelerated expansion
Domestic production lines are expected to be added in 24, 8 in Hubei, 8 in Jiangsu, and 1 in Chongqing; overseas production capacity is also progressing steadily. The Hungarian plant has been completed, mass production has already been put into 24Q3, construction is being accelerated, and mass production is expected in 25 years. In terms of equipment, the single-line production capacity has exceeded 100 million square meters. The new production line is 8 meters wide and the speed is 120 meters.
Diversify and optimize product structures to continuously adapt to new lithium battery needs
The company develops non-fluorine-based mixed-coating diaphragms and expands the production of base films and coating films in response to fast charging requirements; on the solid side, the company custom-developed semi-solid diaphragms for Azure and research and development of materials related to all-solid sulfide solid electrolytes.
Investment advice
We expect net profit to be approximately RMB 15/2.6 billion for the year 24 and 25, respectively, and the corresponding PE is 23/13X, respectively. First coverage, giving a “buy” rating.
Risk warning
Increased market competition, fluctuating prices for major raw materials, technological progress, and product substitution.