Investment events
(1) In 2023, the company's revenue was 3,013 billion yuan, up 4.62% year on year; net profit to mother was 576 million yuan, down 19.87% year on year; net profit after deducting non-return to mother was 545 million yuan, down 20.20% year on year; it is planned to distribute a cash dividend of 2.2 yuan (tax included) for every 10 shares.
(2) In the first quarter of 2024, the company's revenue was 715 million yuan, up 7.51% year on year; net profit to mother was 107 million yuan, down 41.45% year on year; net profit after deducting non-return to mother was 97 million yuan, down 39.66% year on year.
Key points of investment
2024Q1 performance is under pressure in the short term, and profitability bottomed out at an accelerated pace
The company's gross margin for the fourth quarter of 2023 was 38.3%, down 9.6 percentage points from month to month. We think it was mainly affected by price cuts; the cost ratio for the period was 25.1%, up 9.9 percentage points from month to month, mainly due to the increase in management expenses ratio by 7.2 percentage points month on month; net interest rate was -11.6%, down 46.8 percentage points from month to month. In addition to the impact of period expenses, the company's revenue from non-current accounts fell by about 62 million yuan in a single quarter. The gross margin for the first quarter of 2024 was 36.0%, down 2.3 percentage points from the previous quarter. Thanks to the reduction in the expense ratio for the period to 19.3% and the normalization of non-current accounts, the company's net interest rate recovered to 14.8%.
A supply agreement was signed with LG ES and Samsung SDI to actively seek to go overseas. In November 2023, the company and LG ES signed a “Global Strategic Cooperation Memorandum”. During the period 2024-2030, the two parties agreed to establish a cooperative framework for the purchase of no less than 12 billion square meters of diaphragms; in April 2024, the company announced that it had signed a “Strategic Memorandum” with Samsung SDI, agreeing that the company would supply about 2.22 billion square meters of wet coated diaphragms to it from the date the agreement came into effect until the end of 2030. Furthermore, in December 2023, the company completed issuing GDR. We believe that the company's share of overseas customers will continue to increase in the future, thereby improving profitability.
Accelerate production capacity expansion and lay out the Malaysian base at the end of the first quarter of 2024. At the end of the first quarter of 2024, the company's construction project was about 3.5 billion yuan, mainly at the Nantong base, Foshan base, European base and ASEAN base. Specifically, the company's planned total production capacity in Foshan is 3.2 billion square meters of wet diaphragms, 1.6 billion square meters of dry diaphragms, and 3.5 billion square meters of coated diaphragms; in Malaysia, the total production capacity is 2 billion square meters of wet diaphragms and supporting coated diaphragms. In addition, on April 28, the company and Taixin Materials jointly released aramid series diaphragm products. Compared with mainstream ceramics or PVDF coatings, SAFEBM aramid coated diaphragms are superior in thermal performance, liquid absorption, and liquid retention, and are lighter, which can bring higher electrical performance, safety and manufacturing efficiency to batteries.
Profit forecasting and valuation
The profit forecast was lowered and the “gain” rating was maintained. Considering the intensification of competition in the industry and the decline in product prices, we carefully lowered the company's net profit due to mother in 2024-2025 to $599 million and 822 million yuan (1,501 billion yuan and 1,949 million yuan, respectively before the reduction), and added a 2026 forecast of 1,008 billion yuan, corresponding EPS of 0.45, 0.61, and 0.75 yuan, respectively, and the corresponding PE of 24, 17, and 14 times. Maintain an “Overweight” rating.
Risk warning
Competition in the industry intensifies, market demand falls short of expectations, and the risk of changes in technology routes.