Incidents. On April 29, 2024, the company released the 2023 annual report and the 2024 quarterly report. In '23, the company achieved annual revenue of 16.436 billion yuan, a year-on-year change of +41.84%, achieving net profit attributable to mother of 1,888 billion yuan, a year-on-year change of -101.49%, net profit after deducting non-backward net profit of 1,741 billion yuan, a year-on-year change of -73.75%.
24Q1 performance split. Revenue and net profit: The company's 2024Q1 revenue was 2,924 million yuan, -21.70% YoY, -43.82% month-on-month, net profit to mother was -217 million yuan, +38.20% YoY, +28.66% month-on-month, net profit after deduction of -184 million yuan, +49.63% YoY and +29.22% month-on-month. Gross profit margin: 2024Q1 gross margin was 11.89%, +9.98pct year over year, and -2.35pct month-on-month. Net interest rate: 2024Q1 net margin was -7.43%, +1.98pcts year over year, and -1.58pcts month-on-month. Expense rate: The company's expense ratio for the 2024Q1 period was 17.85%, +7.81 pcts year on year. Among them, sales, management, R&D, and finance expenses were 4.14%, 4.99%, 5.03%, and 3.69%, respectively.
The scale of revenue has increased, and profits are under pressure. The company's revenue increased by 41.84% year-on-year in '23, mainly due to the growth in the domestic new energy vehicle market and product exports. The company's shipments increased, and the company's global power battery shipments exceeded 16 GWh in '23. On the profit side, the company's net profit fell 101.49% year on year in '23, mainly due to 1) increased competition in the industry leading to a decline in product prices, raising a total of 606 million yuan to prepare for the price drop; 2) Turkish joint venture Siro's production capacity climbed, compounding the high procurement price of raw materials, causing a loss of 270 million yuan; 3) loss of 256 million yuan from fair value changes. By the end of '23, the company's high-priced inventory at the beginning of the period had basically been digested. As the company's efforts to reduce costs and increase efficiency continued, losses were expected to shrink.
Pay attention to R&D investment to ensure a leading position in technology. The company invested 749 million yuan in R&D in '23, an increase of 151 million yuan over the same period last year. The company's SPS large soft pack power battery system has entered the industrialization stage. The development of long-cycle power batteries has completed technical reserves. Existing mass-produced products can still maintain 80% capacity after 4,000 charge/discharge cycles. High-performance LMFP batteries are in the small trial development stage, sodium-ion batteries have completed first-generation product development and mass production and loading, and second-generation sodium-ion batteries are being developed.
Overseas revenue is over half, and overseas production capacity continues to be built. In '23, the company achieved overseas revenue of 9.883 billion yuan, up 124.70% year on year, accounting for 60.07% of revenue, corresponding gross profit margin of 12.72%, which is 18.64pcts higher than domestic revenue of -5.91%. In terms of overseas production capacity, the company's Turkish joint venture Siro completed and put into operation a 6 GWh module and pack production line in March 2023 to support business in Europe, the Middle East, Africa and South Asia. In terms of overseas customers, the company continues to deepen its strategic cooperation with Mercedes-Benz, adding Siro, a key overseas customer, and has obtained project targets for Mahindra Group, India's second-largest automotive industry group, and has already cooperated deeply with leading overseas companies and delivered eVTOL products.
Investment advice: We expect the company to achieve revenue of 172.08, 237.30, and 28.945 billion yuan in 2024-2026, with year-on-year growth rates of 4.7%, 37.9%, and 22.0%, net profit to mother of 1.42, 7.51, and 1,289 billion yuan, respectively. The year-on-year growth rates are 107.6%, 430.5%, and 71.6%, corresponding PE is 110, 21, and 12 times. Considering the company's leading technical strength, it maintains a “recommended” rating.
Risk warning: The release of overseas production capacity fell short of expectations, and fluctuations in raw material prices exceeded expectations.