Event: The company publishes its 2023 annual report. In 2023, the company achieved revenue of 3.415 billion yuan, +17.96% year on year, realized net profit of 53 million yuan, -87.15% year on year, realized net profit deducted from non-return mother was 0.06 billion yuan, -98.42% year on year; achieved gross sales margin of 6.13%, -13.98 pct year on year, net sales margin of 1.55%, year-on-year -12.72 pct. The sharp decline in the company's profits is mainly due to intense competition in the industry. The phased imbalance between supply and demand has led to a sharp drop in copper foil processing costs. On a quarterly basis, 23Q4 achieved revenue of 943 million yuan, +18.66%/+3.00%; realized net profit to mother of 0.28 million yuan, -73.77% year-on-year, reversing losses month-on-month; realized net profit deducted from mother of 08 billion yuan, -90.49% year-on-year, reversing losses month-on-month. The results are in line with market expectations.
The company's copper foil production and sales continue to rise, and industry processing costs are expected to gradually rise along with copper prices in 24 years. In 2023, the copper foil industry released a lot of new production capacity, and competition intensified. Against this backdrop, the company's copper foil sales increased steadily.
Among them, the company sold 32,300 tons of lithium copper foil, +53.41% year on year; sales volume of standard copper foil was 12,000 tons, +8.37% year over year. We expect that as downstream demand picks up, the company's copper foil shipments are expected to continue to increase. The company's lithium foil/label foil shipments are expected to be around 41/14,000 tons respectively in '24. In terms of processing costs, according to SMM data, the processing fee for 6μm lithium foil was about 253,000 yuan/ton in 2023, and the company's profit was under pressure in the short term; copper prices have clearly rebounded since 2024. As of April 11, copper prices were 761,000 yuan/ton, +9.82% from the end of last year; with the transmission of copper prices and improvements in industry supply and demand, the industry's processing fee and profit level are expected to improve quarterly. We expect the company's copper foil unit profit to rise to around 1,000 yuan/ton in '24.
Emphasis is placed on innovative research and development, and high-end products are expected to improve the company's profit level. In 2023, the company invested 135 million yuan in R&D, +23.91% over the same period; the company successfully developed 6 μm medium strength high elongation copper foil and has shipped it in batches to downstream customers. Through continuous innovation and research, the company continues to launch new products with high added value, and the future release of high-end products is expected to improve the company's profit level.
Investment advice: We expect the company to achieve net profit of 1.17/2.26/362 million yuan in 24-26, +120.8%/+92.5%/+60.6% year-on-year, maintaining an “increase in holdings” rating.
Risk warning: capacity construction falls short of expectations; industry competition intensifies; downstream demand falls short of expectations