1H24 performance forecast net profit to mother increased 20%-34% year on year. Super Market expects the company to release 1H24 performance forecast: net profit to mother is expected to achieve 0.61 billion yuan to 0.68 billion yuan in the first half of 2024, an increase of 19.9%-33.7% year on year; after deducting non-net profit of 0.59 billion yuan to 0.66 billion yuan, an increase of 19.0% to 33.1% year on year. We calculate that for the 2Q24 single quarter, the company expects to achieve net profit due to mother 0.3 billion yuan - 0.37 billion yuan, an increase of 12.8% - 39.0% year on year; after deducting non-net profit of 0.29 billion yuan - 0.36 billion yuan, an increase of 11.8% - 38.4% year on year. The performance forecast exceeds market expectations. We judge that it is mainly due to continued downstream demand and the company's stable position in the industry.

Key points of interest

As competitive pressure in the industry continues, the company's market position and profitability have stabilized. Looking at downstream demand in the industry, according to the China Automobile Industry Association and the China Automobile Power Battery Industry Innovation Alliance, China's NEV sales volume in the first half of 2024 was 4.944 million vehicles, up 32.0% year on year, and the cumulative load volume of power batteries was 203.3 GWh, up 33.6% year on year. Looking at the competitive pattern of the industry, in recent years, with the increase in the penetration rate of new energy vehicles and the increase in sales volume, the supply in the lithium battery structural parts industry has increased rapidly, forming a situation where industry competition intensifies, supply exceeds demand, and prices are under pressure. In this environment, the company still maintains a relatively stable market share and steady profitability. We believe this reflects the company's excellent comprehensive competitiveness and stable industry position.

Focus on the continued growth of the export business. In 2023, the company's overseas revenue was 0.53 billion yuan, up 118% year on year, accounting for 5% of revenue. We believe that as domestic and foreign battery manufacturers accelerate their production expansion in overseas markets in recent years, the overseas battery structural parts market is expected to achieve relatively rapid expansion and growth, and the overseas market layout is expected to contribute to a new growth curve for the company. Currently, the company has set up three overseas production bases in Germany, Sweden and Hungary, and has entered the supply list of some European battery manufacturers and stable supply, focusing on the sustainability of the company's future export business growth.

Profit forecasting and valuation

Keep outperforming industry ratings and profit forecasts unchanged. Currently trading at 16.0x/13.7x 2024/2025 P/E. Maintain the target price of 105.00 yuan, corresponding to 20.5x/17.6x 2024/2025 P/E, with 28.4% upside.

risks

Sales of new energy vehicles fell short of expectations, increased competition in the industry exceeded expectations, and overseas expansion fell short of expectations.