Key points of investment

The results slightly exceeded expectations. The company's 24Q1-3 revenue was 11.3 billion yuan, same -39%, net profit to mother 0.12 billion yuan, same -81%, gross profit margin 9%, same 0.4 pct, net interest rate to mother 1%, same -2pct; of these, 24Q3 revenue was 4.4 billion yuan, -22%/+39% year over month, net profit to mother 0.11 billion yuan, year-on-month, -55%/+123%, gross profit margin 11%, month-on-month +0.6/+0.3pct, net profit margin 2.4% month-on-month 1.8/+0.9pct, the performance slightly exceeded market expectations.

Q3 sales increased 33%, South Korea's Q4 phase was fully produced, and the share of overseas shipments continued to increase. 24Q1-3's three-yuan sales volume is nearly 0.09 million tons, of which Q3 sales volume exceeded 0.035 million tons, an increase of 33%, and the global market share increased by 4 pcts to 14.4% month-on-month, further consolidating its leading position. We expect Q4 to ship 0.035 million tons+, and the annual three-yuan cathode shipment volume is expected to reach about 0.125 million tons, an increase of about 25%. In terms of overseas markets, Q1-3 shipped nearly 0.015 million tons to customers in Europe, America, Japan, and South Korea, accounting for 20% + of overseas shipments in Q3; the first phase of the Korean factory is expected to reach full production of 0.02 million tons; the second phase of 0.04 million tons is expected to be completed in 25Q1. Large-scale mass production will begin in Q3, and the overseas share will increase further. In addition, ultra-high nickel products also gradually contributed to the increase. Among them, 9 series products sold more than 0.02 million tons of Q1-3, accounting for nearly 25%.

Losses in the new business and the Korean factory have narrowed, and profits have improved markedly, and Q4 will increase further. We estimate that the 24Q3 cathode deducts a single ton of non-profit of about 0.0026 million yuan, an increase of 44%, mainly due to new businesses such as sodium electricity, lithium manganese, and precursors, and the narrowing of losses at the Korean factory; the loss of precursors, lithium manganese, and sodium electricity Q3 is nearly 0.05 billion yuan. If added back, the three-element cathode Q3 deducts a non-profit of 0.004 million yuan +. Q4 The Korean factory is expected to achieve break-even after the first phase of production, and the second phase will improve the energy efficiency and automation level of the production line, and the profit level is expected to improve further.

Q3 Operating cash flow improved significantly, and impairment was carefully calculated. 24Q1-3 accrued asset impairment losses of 0.07 billion yuan, of which 0.05 billion yuan was accrued in Q3. Expense ratio for the Q1-3 period was 6.7%, of which Q3 cost ratio was 6.7%, +2.5/-1.3pct; Q1-3 net operating cash flow -0.48 billion yuan, same -154%, of which Q3 was 0.36 billion yuan, +666%/+119.5% YoY; 24Q1-3 capital expenditure 1.4 billion yuan, same +14%, of which Q3 capital expenditure was 0.7 billion yuan, +184%/+214% YoY ; Inventory at the end of 24Q3 was 1.9 billion yuan, up 24% from the end of Q2.

Profit forecast and investment rating: Since the progress of the company's overseas factories exceeded expectations, we raised our 2024-2026 profit forecast. We expect the company's net profit to be 0.25/0.7/1 billion yuan in 2024-2026 (the original forecast was 0.22/0.48/0.76 billion yuan), -57%/+178%/+43% year-on-year, corresponding to 55x/20x/14x in 24-26. Considering the company as a ternary cathode leader, the overseas layout has obvious advantages and maintains a “buy” rating.

Risk warning: Production capacity release falls short of expectations, demand falls short of expectations.