Key points of investment

Q3 Gross margin reached a new high, and actual profit greatly exceeded expectations. The company's Q3 revenue was 92.3 billion yuan, -12%/+6% month-on-month, net profit of 13.1 billion yuan, +26%/+6%, after deducting non-net profit of 12.1 billion yuan, +29%/+12% month-on-month; gross profit margin 31.2%, +8.7pct/4.5pct, net profit margin 14.2%, 4pct/+0pct year-on-month. Q3 calculated 4.7 billion yuan of asset impairment. If added back, actual operating profit was nearly 17 billion yuan.

Q3 shipments are 125 GWH. Domestic power and overseas energy storage demand have exceeded expectations since August. The company is close to full production, and shipments have maintained 20-25% growth in 25 years. Q3 shipments were 125 gwh, +25%/+14% year over month, and 330 gwh in the first three quarters, up 22% year on year. Among them, Q3 energy storage shipments are 30GWH, and the year-on-month ratio is +65%/+20%, and the sustainability can be expected. We expect annual shipments of 105-110 GWH, an increase of 55% +, and maintain 50% growth in 25 years; Q3 power sales are 95GWH, +16%/+12% YoY, and annual shipments are expected to be 370 gwh+, an increase of 16%, and the global share is expected to grow by 15% + in 25 years. Therefore, the company is expected to ship 480 GWH in '24, an increase of 23%, and is expected to ship 580-600 GWH in '25, an increase of 20%-25%.

Structural optimization+scaling, Q3 gross margin greatly exceeded expectations. We calculated that the average power price for Q3 was 0.75 yuan/wh, -5% month-on-month, 31% gross profit margin, 0.21 yuan/wh for a single wh, an increase of 0.02 yuan month-on-month, and 0.12 yuan for a single wh. Q3 The average price of energy storage was 0.67 yuan/wh, -5% month-on-month, gross profit margin 34%, gross profit per wh 0.2 yuan/wh, 0.01 yuan month-on-month increase, 0.12 yuan per hour profit. Profits that exceeded expectations mainly benefited from premiums brought by the company's new products such as Shenxing, Kirin, and 314ah. In addition, we estimate that Q3 large-scale depreciation reduced single-wh depreciation by 0.007 yuan/wh, increasing profits.

Q3 Significantly calculated lithium carbonate impairment losses, and the risk was fully released. Q3 Asset impairment losses of 4.7 billion yuan, including 1.9 billion yuan in fixed assets and 0.6 billion yuan in works under construction, mainly depreciation of fixed assets related to lithium mine resources; 2 billion yuan in intangible assets, mainly mining/prospecting rights. The original value was 7.9 billion yuan. Previously, 1.8 billion yuan had already been calculated, and the book value is estimated to be 4 billion yuan after calculation.

Inventory increased to Q4 preparation. It is expected that liabilities will increase further, other earnings will decrease markedly, and the quality of performance is high. Inventory at the end of Q3 was 55.2 billion yuan, up 15% from the end of Q2. Demand for H2 exceeded expectations, and full production and preparation began in September; the estimated debt at the end of Q3 was 65.4 billion yuan, an increase of 6.2 billion yuan over the end of Q2, of which 3 billion yuan is expected to be guaranteed and 3.2 billion yuan in rebates. Q3 Net operating cash flow was 22.7 billion yuan, +46%/+39% year over month; capital expenditure was 7.4 billion yuan, up 10%; production expansion progressed steadily. During the Q3 period, the rate was 9.8%, up 0.1 pct from month to month, which was relatively stable. Q3 investment income was 1.05 billion yuan, down 17%; other income was 1.4 billion yuan, down 37%.

Profit forecast and investment rating: Considering that downstream demand exceeded expectations, we revised the company's performance forecast to 50.2/61.7/75.6 billion yuan in 24-26 (originally estimated 50.2/60.5/72.8 billion yuan), up 14%/23%/22% year over year, corresponding PE was 22/18/15x. Considering that the company is a global battery leader, the corresponding target price is 393 yuan, maintaining a “buy” rating.

Risk warning: Electric vehicle sales fell short of expectations, raw material prices fluctuated, and increased competition exceeded expectations.