Event: The company released its 2023 and 2024 quarterly reports. In 2023, the company achieved revenue of 4.969 billion yuan, +7.06% year on year; realized net profit of 0.19 million yuan, -96.34% year on year, net profit of non-return to mother -0.28 million yuan, -105.40% year on year; gross sales margin of 5.83%, -14.02 pct year on year, net sales margin 0.33%, year-on-year -10.88pct. On a quarterly basis, 23Q4 achieved revenue of 1,263 billion yuan, or -7.13%/-22.44%, respectively; realized net profit attributable to mother of -0.12 billion yuan, -114.84%/-221.99%, and realized net profit without return to mother of -37 million yuan, or -143.19%/-1194.19% year-on-month. The 24Q1 company achieved revenue of 930 million yuan, -5.48%/-26.35%; realized net profit to mother of 0.48 million yuan, -229.76%/-288.91%, after deducting non-return net profit of -0.51 million yuan, or -244.90%/-39.32% year-on-month. The results are in line with market expectations.

Production capacity reached 100,000 tons at the end of '23, and copper foil production and sales continued to increase. In 2023, the company's fund-raising projects, the Jiangxi Jiayuan Electrolytic Copper Foil Project with an annual output of 20,000 tons and Ningde Jiayuan's high-performance copper foil project with an annual output of 15,000 tons, were completed successively for trial production and entered the production capacity climbing phase. Jiayuan Era cooperated with Ningde Times to produce 100,000 tons of copper foil per year. The first phase of the first phase of the production line entered trial production at the end of September. By the end of 2023, the company had an annual production capacity of 100,000 tons. In terms of shipment volume, the company produced 58,000 tons of copper foil in 23, +9.69% year on year; copper foil sales volume was 57,600 tons, +17.47% year over year, and production and sales continued to increase.

Increased competition has put pressure on profits in the short term, and industry processing costs are expected to gradually rise along with copper prices. Production capacity in the industry was intensively released in 2023, and there was a phased oversupply, leading to a sharp drop in copper foil processing costs. According to SMM data, the average processing fee for 6μm lithium foil in 2023 was 253,000 yuan/ton, compared to -39.99%. As of April 29, 2024, the average processing fee was 17,500 yuan/ton. The sharp drop in processing fees put pressure on the company's profit in the short term. Copper prices have clearly rebounded since this year. As of April 29, the price of copper was 80,700 yuan/ton, +16.43% from the end of last year; with the transmission of copper prices and improvements in industry supply and demand, the industry's processing fees and profit levels are expected to improve quarterly.

Investment advice: Considering the intensification of competition in the industry and the pressure on the company's short-term performance, we lowered the company's net profit from 24-26 to 0.19/2.20/453 million yuan, -0.5%/+1062.2%/+105.6% year-on-year, corresponding EPS to 0.04/0.52/1.06 yuan, giving it an “increase in weight” rating.

Risk warning: downstream demand falls short of expectations; capacity construction falls short of expectations; industry competition intensifies