Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 47.862 billion yuan, a year-on-year decrease of 8.24%; achieved net profit of 1,076 billion yuan, an increase of 0.77%; realized net profit withheld from mother of 973 million yuan, an increase of 20.39% over the previous year; and achieved an overall gross profit margin of 14.60%, up 0.76Pct from 2022.
Incident reviews:
In 2023, the company's gross margin of the consumer battery sector increased by 1.12 pct. The scale of the consumer lithium battery business showed an increasing trend, and the revenue from the consumer battery business gradually expanded. In 2023, the company's consumer battery business achieved revenue of 28.543 billion yuan, a year-on-year decrease of 10.85%, and its share of revenue fell to 59.64%. Benefiting from the increase in the self-supply ratio of the company's consumer cells, the company achieved a gross profit margin of 14.91%, an increase of 1.12 Pct compared to 2022. In terms of shipment volume, despite the sluggish market environment, the company actively increased its market share and achieved a double increase in shipments in the mobile phone digital products and laptop business. In the future, with the gradual improvement of the economic environment, the superposition of switching cycles and the application of AI in mobile phones, by actively developing consumer mobile phone batteries suitable for all types of customers and expanding the world's leading laptop brand customers, the continuous increase in the company's battery self-supply ratio, consumer batteries are expected to grow steadily as the company's traditional core business.
The large-scale effect of the company's electric vehicle battery business is gradually showing. The gross margin increased by 0.94 pct compared to 2022, and the installed capacity ranked 10th in the world. 2023. The company shipped 11.66 GWH of power batteries, achieving revenue of 10.795 billion yuan, a year-on-year decrease of 14.91%, accounting for 22.55% of revenue. According to statistics from the Korean research agency SNE Research, in 2023, the company ranked 10th in the world with an installed capacity of 10.5 GWh, a year-on-year increase of 15.4%, and a market share of 1.5%. In terms of new product development, the company launched “flash charging” batteries and ultra-fast charging 4C batteries for the BEV market, and the development of a new generation of 5C-6C “flash charging” batteries is progressing smoothly. In addition, the company continues to develop advanced battery products such as silicon anode high specific energy batteries, lithium manganese phosphate batteries, sodium-ion batteries, solid state batteries, and lithium metal batteries to meet the future diversified needs of end customers. Currently, the company's main customers in the power battery sector are leading domestic and foreign car companies and emerging new car builders. Domestic customers include Geely, Dongfeng, SAIC, Ideal, etc., and overseas customers include Renault, Nissan, etc. In addition, the company has also been selected by customers such as Volvo and German Volkswagen. In the future, as the company continues to explore domestic and foreign markets, and large-scale shipments of customer project orders, the scale effect of the power battery business may gradually become apparent. Combined with strong investment in new products and technology, the company's power battery sector performance is expected to grow further.
The company's revenue from the energy storage system business has increased dramatically, and the process of going overseas has accelerated. In 2023, the company's energy storage system business revenue reached 1,110 billion yuan, a year-on-year increase of 144%, and achieved a gross profit margin of 19.04%. In addition, the company has further improved its global layout and added overseas factories in Hungary, Morocco and Vietnam. In the field of energy storage cells, the company's energy storage battery layout covers power grid energy storage, home energy storage and data center backup application scenarios. In 2023, the company released 314Ah high-capacity long-life batteries, which were successfully promoted at home and abroad and were recognized by first-line customers. For power grid energy storage, the company has achieved mass production of 314Ah/280Ah batteries. The product cycle is greater than 12,000 times, which can guarantee the reliable and safe operation of power plants and industrial and commercial energy storage for 20 years. The 72 Ah6C product data center energy storage products mass-produced by the company will reduce the power cost by 10% compared to traditional products. The next generation products under development will further reduce power costs and promote “lead to lithium reduction” in data center backup.
In the future, the gradual increase in the company's energy storage system business scale and energy storage cell self-supply rate may guarantee the company's performance growth in this sector.
The company's management expenses increased dramatically, asset impairment losses reached 630 million yuan, and net cash flow from operating activities reached a record high. In 2023, the company's management expenses were 2,740 billion yuan, an increase of 27.50% over 2022, and the management expense ratio was 5.72%, an increase of 1.60 pct over 2022, mainly due to a sharp increase in the company's personnel in the power and energy storage sector. Due to the decline in the price of upstream raw materials, the price of power and energy storage batteries has declined, and the company's sharp preparation for inventory price declines has led to a high increase in the company's asset impairment losses. In 2023, the company's operating activities were strong and its repayment capacity was outstanding. The net cash flow from operating activities reached a record high of 3.618 billion yuan, a significant increase of 547.52% over the 559 million yuan in 2022.
Investment advice:
We lowered our performance forecast. The company's net profit for 2024-2026 is estimated to be 11.23/14.78/1,549 billion yuan, respectively (the previous forecast value for 2024-2025 was 1,55/ 2.015 billion yuan), EPS was 0.60/0.79/0.83 yuan, respectively, and the current stock price corresponding to PE is 23.57/17.91/17.08 times, respectively. Considering that the company's consumer battery business is stable, the scale effect of the mobile storage business is gradually showing, so it maintains a “buy” rating.
Risk warning:
Risk of fluctuations in raw material prices; risk of product and technology updates; risk of downstream demand falling short of expectations; risk of increased market competition.