Performance is in line with expectations, and revenue is growing steadily

In 2023, the company achieved revenue of 47.748 billion yuan, +14% year on year; net profit to mother was 2,305 billion yuan, +20.77% year over year; net profit without return to mother was 1,883 billion yuan, +21.92% year over year, in line with our expectations.

We expect the 24-26 EPS to be 2.77/3.45/4.12 yuan, respectively. Referring to the 24-year average PE12.66 times the consistent expectations of the company Wind, considering that the company has a stable lead-acid battery leading position and strong customer channel advantage, the company is given a 5% valuation premium, corresponding to 13.3x2024PE, corresponding to a target price of 36.84 yuan (previous value was 38.03 yuan), maintaining a “buy” rating.

Profitability increased in the fourth quarter, and net interest rate improved month-on-month

23Q4 revenue was 12.684 billion yuan, +7.12%/-6.08%; net profit to mother was 589 million, +22.69%/-4.25%; net profit to mother was 4.67%, +0.59pct/+0.09pct; net profit after deducting non-return to mother was 514 million yuan, +12.21%/+11.19%; net margin improved month-on-month. We believe that price competition in the Q4 downstream two-wheeler market has eased, and lead-acid battery prices have rebounded. The cost rate was 8.23% over the 23-year period, -1.22pct year on year, and the control capacity was improved. The net operating cash inflow of the company was 2,534 billion yuan, +48.68% over the same period last year, increasing operating capacity.

The leading advantage of lead-acid batteries is stable, and the market share continues to increase

As the company's traditional main business, lead-acid power batteries have strong channel+customer+brand barriers, and are expected to continue to grow steadily. The company's lead-acid battery business revenue in '23 was 44.407 billion yuan, +18.75% year over year, and sales volume was 124.917,900 kVAH, +24.52% year over year. Mainly due to the further increase in the market share of the company's products in the electric two-wheeler vehicle supporting market and replacement market, the leading position continued to strengthen. In addition, the company has responded positively to overseas trends, accelerated overseas production and channel construction, set up its first overseas manufacturing base in Vietnam in '23, used the Southeast Asian market as an entry point, signed dozens of overseas distributors, and set up offices in Thailand, the Netherlands and other countries.

Diversified technology layout, energy storage business development or acceleration

The energy storage business has become the company's core business development direction, and an energy storage system combining the “lead, lithium, and sodium hydrogen” technology routes will be built. In '23, the company adjusted its strategic direction of lithium batteries to focus on the field of energy storage, successfully launched various lithium battery energy storage cells such as 100Ah to 305Ah, steadily promoted the implementation of new production capacity, and successfully put into operation 6 GWh of energy storage lithium batteries in November. Furthermore, as demand for energy storage safety increases, domestic lead-carbon energy storage projects have blossomed in many places. The company's layout is relatively early, making lead-carbon and lead-acid battery production lines common, and as a lead-acid battery leader, it has the advantage of large-scale production and cost control, which is expected to expand and accelerate the development of the company's energy storage business.

Risk warning: the progress of capacity expansion falls short of expectations; the risk of increased market competition; the risk that the industrialization of new technology falls short of expectations; the risk of a sharp rise in raw materials.