Description of the event

Everweft Lithium Energy released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 34.049 billion yuan, a year-on-year decrease of 4.16%; net profit to mother was 3.189 billion yuan, a year-on-year decrease of 6.88%; after deducting non-net profit of 2.5 billion yuan, a year-on-year increase of 16.00%. Q3 achieved revenue of 12.39 billion yuan, down 1.30% year on year and 0.39% month on month; net profit to mother was 1.051 billion yuan, down 17.44% year on year and 1.88% month on month; after deducting non-net profit of 1.001 billion yuan, up 11.38% year on year and 25.47% month on month.

Incident comments

On the revenue side, 2024Q3's power battery shipments were 7.2 GWh, a slight increase over the previous month; energy storage battery shipments were 14.8 GWh, an increase of 6.1% over the previous month, and remained at full production. On the profit side, the overall gross margin in Q3 was 19.01%, up 3.45 pct from month to month, up 0.67 pct; by business, the net profit of energy storage batteries is expected to increase month-on-month, which is expected to be related to improved order structure and scale increase and cost reduction under full production; power batteries as a whole are close to break-even, and the decline in the share of overseas customers still suppresses profits. On the consumer side, it is expected that small cylindrical batteries will maintain a high operating rate, lithium primary batteries will increase steadily, and overall profitability will improve. The net income from Q3 investment was 0.145 billion yuan. In addition to the revenue contributed by SMOORE, other investment income is expected to decline month-on-month, or is related to the decline in nickel prices; at the same time, it is expected that there will be a revenue contribution from the implementation of the CLS model.

In terms of other financial data, the 2024Q3 company's expense ratio was 10.74%, an increase over the same period last year. In addition, Q3 accrued asset impairment of 0.009 billion yuan and credit impairment of 0.014 billion yuan. Impairment losses narrowed month-on-month. In the end, the Q3 company achieved a net interest rate of 8.49%, which declined from month to month, mainly related to the narrowing of investment income and other earnings.

Looking ahead, while the utilization rate of energy storage capacity has increased significantly, Everweft Lithium also showed structural profit improvements brought about by an increase in the share of high-quality orders. In 2025, along with the increase in the share of the company's overseas energy storage and system share, it is expected to support profit recovery.

In addition, the company's power overseas customers, small cylinder overseas production capacity, and the CLS model are also worth looking forward to. Expected to be 4.5 and 5.8 billion yuan in 2024 and 2025, continue to be recommended.

Risk warning

1. Demand for new energy vehicles and energy storage terminals falls short of expectations;

2. Competition in the industrial chain has intensified.