Description of the event

Zhongke Electric released its 2024 three-quarter report. In the first three quarters, it achieved revenue of 3.884 billion yuan, an increase of 10.27% year on year; realized net profit to mother of 0.184 billion yuan, an increase of 426.25% year on year; and realized deducted non-net profit of 0.206 billion yuan, an increase of 899.70% year on year. Q3 achieved revenue of 1.62 billion yuan, up 25.8% year on year, up 35.2% month on month; realized net profit of 0.114 billion yuan, up 66.5% year on year, up 151.27% month on month; realized deducted non-net profit of 0.117 billion yuan, up 40.4% year on year, up 110.46% month on month.

Incident comments

On the revenue side, the company's shipments are expected to increase significantly month-on-month in 2024Q3, reflecting strong terminal demand; on the profit side, the single-ton sales price of the company's Q3 anode products is expected to increase month-on-month, mainly due to an increase in the share of higher-priced fast charging products; on the one hand, due to increased shipment volume leading to a decline in single-ton depreciation, and on the other hand, a further decline in graphitization costs; considering the return of non-net profit to minority shareholders' equity and asset depreciation, the net profit of a single ton of operations improved sharply month-on-month.

In terms of other financial data, the 2024Q3 fee rate was 9.71%, down 2.32pct year on year and 2.17pct month-on-month. Expense control is good. Additionally, Q3 accrued asset and credit impairment losses of 0.038 billion yuan. The final net interest rate was 7.06%, a significant increase from month to month.

Looking ahead, it is expected that the company's Q4 production schedule will remain strong and continue to be full; in terms of production capacity, the first phase of the integrated production capacity of the Qujing Joint Venture Base is expected to reach production within the year, the next-generation graphitization process will further reduce costs, and the second phase of graphitization plans to expand production at the Gui'an base is expected to further reduce the average cost of graphitization self-supply. On the demand side, the company binds Ningde, China Airlines, and Yiwei domestically, and overseas customers include LG and SK; in terms of product structure, the company's fast charging orders from major customers are growing rapidly, and the company's capacity utilization rate is expected to remain high as terminal demand continues to pick up. In terms of profit, the company's net profit per ton of operations picked up markedly in Q3. The Q4 operating rate remained high month-on-month, product prices rose month-on-month due to the fast charging structure, and 2024Q4 single-ton profit is expected to continue to rise and 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.