1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of 3.454 billion yuan, +4.8% year on month, -8.3% month on month; net profit to mother of 156 million yuan, -4.9% year on month, -9.2% month on month; net profit after deducting non-return to mother was 168 million yuan, +35.4% year on year, +11.3% month on month. The company's performance was in line with our expectations.
Development trends
Shipments in the lead-acid business increased by more than 15% year on year, and profitability increased year on month. We estimate that the company's 1Q24 lead-acid business revenue was 2.9-30 billion yuan, up 16-17% year on year, shipment up 16-17% year on year. By market, we estimate that the front-end market performed well. We estimate that shipments are growing by more than 25% year on year. We think or benefit from the increase in production by some own-brand car companies, 2) the aftermarket may be affected by extreme weather during the Spring Festival, and 3) Overseas shipping performance is strong. We estimate that overseas shipments increased by more than 60% in 1Q24. On the profit side, we estimate 1Q24 gross margin to be close to 21%, up 0.4-0.5ppt from the same period last month, mainly due to the high increase in 1Q24 shipments, full utilization of the company's production capacity, and economies of scale driving the increase in gross margin. Looking ahead to 2Q24, we believe that the front-end market is expected to grow steadily with downstream production, the year-on-year growth rate of the aftermarket is expected to pick up, and overseas shipments are expected to maintain a high year-on-year increase. The profit side will benefit from full capacity utilization and increased share of afterwear and overseas sales, and gross margin or remain relatively high month-on-month.
Revenue from low-voltage lithium batteries may double year on year, and it is expected that the amount will gradually be released at the fixed level. We estimate that the revenue of the 1Q24 low-voltage lithium battery business will double, and on the profit side, we estimate that it is still at a loss. The company added 35 new targets for low-voltage lithium battery projects last year. Looking ahead, we believe that the company's targeted projects are expected to gradually scale up and drive an increase in low-voltage lithium battery shipments. It is expected that 2025-2026 will achieve batch supply and drive the lithium battery business to change from loss to profit.
The year-on-year increase in net profit after deduction was strong, or due to the impact of business structure optimization and changes in fair value profit and loss.
Net profit without return to mother grew strongly year-on-year, and there was a big difference between revenue and net profit growth. Our analysis was mainly due to 1) business structure optimization: we estimate that the share of low-profit recycled lead business in 1Q24 decreased and the share of high-profit lead-acid business increased, corresponding to 1Q24 gross profit margin 17.3%, +2.1ppt, month-on-month +1.0ppt, 2) Changes in fair value of assets affect profit: The company's foreign investment in Jinlaida, 1Q23 corresponds to profit and loss of 0.16 million yuan, year-on-year The net profit to mother increased by 49 million yuan.
Profit forecasting and valuation
We maintain the company's 2024/2025 profit forecast of 811/1,097 million yuan, maintain a target price of 10.60 yuan, and maintain a performance industry rating. The current stock price and target price correspond to 11.5x/8.5x P/E and 15.4x/11.3x P/E in 2024/2025, respectively, with 33.7% upward space.
risks
China's automobile production and sales fell short of expectations, domestic demand for energy storage fell short of expectations, and the macroeconomic economy declined.