Introduction to this report:

The company's power storage business developed well in the first half of the year, and profitability declined in the short term due to industry and product structure.

Looking at new products and models over the long term, it is expected that the company will continue to grow.

Key points of investment:

Maintain an increase in holdings rating. Considering the profit pressure brought about by phased overcapacity in the industry, the 24-25 EPS was reduced to 2.26 (-0.07) yuan and 2.69 (-0.36) yuan, and the 26-year EPS was added by 3.35 yuan. Refer to similar comparable companies that gave 18.61X PE for 24 years, and the target price was reduced to 42.06 yuan.

Results fell slightly short of expectations, and profitability declined. 24Q2 achieved revenue of 12.342 billion yuan, up 4.7% and 32.5%; net profit to mother of 1.072 billion yuan, up 6.0% and 0.6%; net profit without return to mother of 0.798 billion yuan, up 23.7% and 13.8%.

23Q2's gross margin was 15.56%, -2.08pct month-on-month, mainly due to the rapid increase in energy storage revenue share and lower gross margin than the consumer business.

Energy storage volume has become a highlight, and the consumer battery business has achieved high growth. In terms of power energy storage, in the first half of 2024, the company shipped 13.54 GWh of power batteries, an increase of 7.03%, and shipments of energy storage batteries were 20.95 GWh, an increase of 133.18%. According to data from the China Automobile Power Battery Industry Innovation Alliance, in the first half of the year, the company ranked fourth in domestic power installed capacity, with a market share of 4.21%; ranked second in domestic NEV commercial vehicle loading volume, with a market share of 13.59%. According to EV Tank data, the company ranked second in the number of electric heavy trucks installed in China in the first half of the year, with a market share of 16.4%.

According to InfoLink data, the company ranked second in the world in terms of energy storage cell shipments in the first half of the year. In terms of consumer batteries, demand for lithium batteries has maintained a good trend, driven by factors such as the rapid growth of the global IoT industry and the entry of smart meter products into a replacement cycle. The gradual increase in downstream demand for electric tools, two-wheelers, etc., has driven the monthly production and sales of consumer cylindrical batteries to exceed 0.1 billion and only achieve full production and sales. On the basis of consolidating existing customers and market segments, small lithium-ion batteries continue to develop leading new customers at home and abroad, and the products have made breakthroughs in many new market segments.

New products and new models help long-term growth. The company took the lead in mass production and delivery of large cylindrical batteries in China. As of June 18, 2024, it has delivered more than 21,000 units.

For overseas markets, the company launched the CLS global cooperative business model. This model has the advantage of asset-light operation and complements existing battery business and industrial collaboration.

Risk warning: NEV sales fall short of expectations, energy storage demand is declining