3Q23 performance meets market expectations
The company announced 3Q23 results: 1-3Q23 achieved revenue of 20.228 billion yuan, year-on-year-5.4%, net profit of 548 million yuan, year-on-year-45.6%; of which 3Q23 realized income of 7.289 billion yuan, year-on-year-2.2% / month-on-month + 7.0%, return-home net profit of 134 million yuan, year-on-year-58.6% / month-on-month-44.3%, basically in line with market expectations.
Trend of development
Shipments of new energy materials have increased steadily. 1-3Q23 Ternary precursor shipments from + 14.5% to ~ 120000 tons compared with the same period last year, firmly ranking in the top two of the global market. Through innovative products such as ultra-high nickel new generation precursors, the company occupies the global high-end ternary market and maintains the stability and improvement of market share. In addition, in terms of overseas layout, the company announced in September that it would invest in the construction of the first Indonesian ternary precursor project with an annual capacity of 30,000 tons of high-nickel power battery to realize the construction of the whole industry chain of "nickel laterite-MHP raw material-ternary precursor material". The company is expected to be put into operation in April 2024, which we believe will help enhance the global competitiveness of the company's core business.
The battery recycling business is growing in volume and profitable. 1-3Q23 power battery recycling business accumulatively recycled power batteries from + 54% to ~ 20,000 tons (2.1kt) compared with the same period last year, achieving revenue of + 39% to 643 million yuan and making profits, demonstrating the strong resilience and future profitability of the company's power battery business model.
Indonesian nickel resources project has become a new profit growth point. 1-3Q23 Nickel Resources Project in Qingmeibang, Indonesia, has shipped 17360 tons of MHP of metallic nickel and guided the production of 26000 gold tons of nickel for the whole year. At present, the second phase of the project has fully entered the state of construction, with a total planned production capacity of 123000 tons of metallic nickel, and the company is expected to be fully put into production in 2024. We think it is expected to become a new profit growth point for the company.
Profit forecast and valuation
Taking into account the pressure on the profitability of precursors and the thickening performance of nickel resources projects, we have lowered our 23-24 profit forecast by 44% to 7.9 billion yuan. We switch to a 24-year valuation, the company is currently trading at a price-to-earnings ratio of 15x 24e, and we lower our target price by 8% to 7.8 yuan, corresponding to a price-to-earnings ratio of 20x 24e and 33% upside; maintain an outperforming industry rating.
Risk
The release of production capacity is not as expected and the market sales price fluctuates.