Core views

In terms of revenue, the company's Q3 shipments continued to increase month-on-month, but revenue declined, mainly due to a 2 GWH increase in shipments from key cell customers, which accounted for about 50% of Q3's cell shipments, which was significantly higher than Q2, affecting the company's unit price; in terms of profit, the company's Q3 gross profit margin was 18.3%, an increase of 0.6 pct month-on-month, mainly due to the increase in the company's capacity utilization rate as the peak season began. In terms of net profit, the company's Q3 operating unit profit was -0.1 cents/Wh, down 2.3 points/Wh from month to month, and the return value was 0.9 points/Wh, and -0.4 points/Wh month-on-month. The main reason was that Q3 financial expenses were 0.389 billion yuan due to exchange losses due to exchange rate declines, and the month-on-month increase of 0.243 billion yuan affected profit.

occurrences

The company released three quarterly reports on results:

2024Q1-Q3 achieved revenue/net profit attributable to mother/ net profit of 25.2/0.41/0.057 billion yuan, +15.6%/+41.1%/+12.6% year over year; of these, Q3 achieved revenue/net profit to mother/ net profit after deduction of 8.381/0.141/0.008 billion yuan, +28%/70%/-47% year over month, and -10%/-30%/-79% month-on-month.

Brief review

In terms of revenue, the company's Q3 shipments continued to increase month-on-month, but revenue declined month-on-month. We estimate that the average price of Q3 power/energy storage batteries is 0.56/0.4 yuan/Wh, which is a significant decrease compared to Q2, mainly due to:

1) Structural changes in the product affect the unit price. The company's 2024Q1-Q3 battery sales are expected to be 43 GWH, of which Q3 sales are 16 GWh, an increase of about 7% over the previous month, and will continue to grow. Affected by the 2 GWh increase in shipments from key downstream cell customers, Q3's cell shipments accounted for about 50%, significantly higher than Q2, affecting the company's unit price.

2) The decline in the price of raw materials such as lithium carbonate affects the unit price. Currently, batteries have formed a multi-material linkage mechanism with downstream customers. The average price of lithium carbonate in Q2/Q3 is 0.11/0.081 million. Combined with the influence of other materials such as copper and aluminum, it is expected to affect the price by about 2 to 3 percent.

In terms of profit, the company's Q3 gross profit margin was 18.3%, an increase of 0.6 pct over the previous month, mainly due to the increase in the company's capacity utilization rate as the peak season began, and at the same time, the gross margin increased due to falling sales prices. In terms of net profit, the company's Q3 operating unit profit was -0.1 cents/Wh, down 2.4 points/Wh from month to month, and the return value was 0.9 points/Wh, and -0.5 points/Wh month-on-month. The main reason was that Q3 financial expenses were 0.389 billion yuan due to exchange losses due to exchange rate declines, and the month-on-month increase of 0.243 billion yuan affected profit.

The company's third-generation batteries have entered the market and will gradually break through mid-range and high-end model customers in the future; 314 energy storage batteries and 52Ah small batteries have climbed smoothly; increased demand from overseas customers such as Tata and Vinfast has led to an improvement in profits. The company's 24/25 performance is expected to be 0.78/1.2 billion yuan, corresponding to the current valuation of 56/36x.

Risk analysis

1) Downstream NEV production and sales fall short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, power restrictions, etc., which in turn affects the company's related business shipments and profitability.

2) The rise in raw material prices exceeded expectations: Since 2021, raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, while at the same time disrupting the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.

4) The fall in lithium carbonate prices exceeded expectations, causing significant depreciation of intangible assets and fixed assets in Jiangxi.