Company announcement: In 2024, H1 achieved revenue of 21.659 billion yuan, 2.137 billion yuan, and 1.499 billion yuan of non-net profit, respectively, a year-on-year decrease of 5.7%, a decrease of 0.64%, and an increase of 19.32%. The company has generally been in a period of rapid development in recent years, maintaining a “Highly Recommended” rating.

The Q2 deduction was in line with expectations, and the consumer battery business recovered rapidly. In 2024, H1 Smore contributed about 0.21 billion yuan to investment income, a slight year-on-year decline. After exclusion, the net profit of the company's H1 division in 2024 was about 1.925 billion yuan, which was basically the same as the previous year. Among them, the net profit of the Q2 division was about 0.957 billion yuan, a slight decrease from month to month. The main reason was that the Q2 division withheld non-net profit of 0.683 billion yuan, an increase of 13% month-on-month and 33% year-on-year. The main reason was the recovery of the consumer business, a rapid recovery in operating rate, and a recovery in profitability.

The market share of energy storage has increased rapidly, and orders are plentiful. In 2024, H1's energy storage business revenue was about 7.77 billion yuan, up 9.93% year on year, and shipments were about 20.95 GWh, up 133% year on year, gross margin was about 14.38%, down 1.25 percentage points year on year. Among them, Q2 energy storage battery shipments were about 13.93 GWh, an increase of 98% month-on-month, achieving breakthrough growth. In 2024, H1's energy storage cell market share has risen to second place in the world. Looking forward to the second half of the year, energy storage orders are still very full. Currently, production and sales are basically at full capacity, and annual shipments are expected to reach 50 GWh.

Power business. In 2024, H1's power business revenue was about 8.993 billion yuan, down 25% year on year, and shipments were about 13.54 GWh, up 7% year on year, gross margin was about 11.45%, down 2.66 percentage points year on year.

Among them, Q2 power battery shipments were about 7 GWh, an increase of 10% over the previous month. The slowdown in the growth rate of power battery shipments in the first half of the year was mainly due to a sharp drop in demand for soft-pack batteries from joint ventures. As a result, the overall passenger vehicle side growth rate slowed down, while commercial vehicle companies achieved rapid growth, ranking second in the country in the first half of the year. It is estimated that the net profit of the company's power and energy storage batteries contributed about 0.5-0.6 billion (including midstream investment profit) in the first half of the year, of which Q2 contributed 0.25-0.3 billion. The net profit per unit for the first half of the year is estimated to be about 0.015 yuan/wh, of which Q2 is about 0.013 yuan/wh. The month-on-month decline is mainly due to a significant drop in the price of Q2 batteries, especially energy storage cells. At the same time, fixed assets increased by 2 billion yuan in Q2, and depreciation increased significantly in a single quarter.

The consumer business recovered rapidly, and small cylinders were at full production and sales. In 2024, H1's consumer battery revenue was 4.848 billion yuan, up 30% year on year, and gross margin was about 28.31%, which greatly exceeded expectations. The main reason was that the 2023 consumer cylinder was in the inventory removal stage and sales declined, but in 2024 it completely recovered. Q2 sales volume was about 0.29 billion, doubling year on year. Currently, single monthly shipments have exceeded 0.1 billion. The cylindrical production line has basically reached full production and sales, and profitability has clearly recovered. It is estimated that the H1 consumer battery business contributed about 0.6-0.7 billion yuan in total profit in 2024, of which Q2 contributed more than 0.4 billion yuan.

Profit forecasting and investment suggestions: The company has reached a certain level in terms of customers and products, and management has also supported the parallel development of the two major differentiated businesses of small lithium batteries and large lithium batteries for power and energy storage. It has now successfully developed into a medium-sized enterprise, and is still in a period of rapid development. The company adjusted its 2024 net profit forecast to 4.57 billion yuan, mainly due to a rapid drop in the price of the raw material lithium carbonate, maintaining a “highly recommended” rating.

Risk warning: The development of power customers fell short of expectations, and the profitability of energy storage batteries fell short of expectations; competition and policy changes in new tobacco products led to deterioration in investment returns.