Results for '23 and 1Q24 are in line with our expectations
The company announced its results for the year 23 and 1Q24: in '23, the company achieved revenue of 16.44 billion yuan, +42% year over year, and net profit to mother of 1.87 billion yuan (vs. 930 million yuan in '22). 1Q24 achieved revenue of 2.92 billion yuan, -22% YoY/-44% month-on-month, and net profit of 220 million yuan (vs. 1Q23/4Q23 was -350 million yuan/-300 million yuan, respectively). The company's results for '23 and 1Q24 are in line with our expectations.
Development trends
1Q24 installed capacity increased steadily, and gross margin gradually recovered. According to data from the Power Battery Industry Innovation Alliance, the company's domestic installed capacity in 1Q24 was 0.98 GWh, an increase of 24% over the previous year. In terms of profit, 1Q24 gross margin was +10ppt to 11.9% year-on-year, mainly due to changes in the customer structure and the digestion of high-priced inventory; looking ahead, with the orderly progress of cost reduction and efficiency, gradual increase in capacity utilization, and continuous optimization of the customer structure, we expect gross margin to increase further.
Expense rates increased during the 1Q24 period, and profit and loss from changes in investment income and fair value dragged down profits. The company's expense ratio for the 1Q24 period was 17.8%, +7.8ppt/month-on-month, mainly due to an increase in the financial expense ratio; investment income was -038 million yuan, mainly due to losses from Turkish joint venture Siro; and fair value change losses of 53 million yuan. Overall, the company's net profit margin was -7.4%, +2ppt/month-on-month -1.6ppt.
Overseas business continues to gain strength, and the results of the new technology layout are gradually showing. In terms of overseas customers, the company's overseas revenue in '23 was +125% to 9.87 billion yuan, accounting for ~ 60% of revenue, corresponding to a gross profit margin of 12.7% (vs. domestic business gross profit margin -5.9%); the company continues to deepen its strategic cooperation with Mercedes-Benz, and at the same time, the key customer Siro is gradually gaining momentum. We believe that the company's overseas business is expected to continue to grow rapidly. In terms of new technology, the company's SPS lithium iron battery has been designated by car companies and introduced into mass production. We believe that, relying on SPS cost and performance advantages, the company is expected to accelerate the development of new and old customer products and open up a second growth curve; first-generation sodium batteries have been mass-produced, and second-generation sodium batteries are being developed; the development of long-cycle power batteries has entered an industrialized state, and existing mass-produced products can still maintain more than 80% capacity after 4,000 charge/discharge cycles; the company has formed a small trial development stage; the company has formed a leading international eVTOL manufacturer Cooperation and products have already been delivered; we are optimistic that the company will continue to consolidate its competitive advantage with a rich product matrix.
Profit forecasting and valuation
We kept our 24-year profit forecast of 70 million yuan unchanged, and introduced a 25-year profit forecast of 780 million yuan for the first time. The company's current transaction is 19.4 times the 25-year P/E. Considering the downward shift in the valuation center, we gave a target price of 15 yuan (corresponding to 25 times P/E in 25 years and a discount rate of 7.5%) based on the 25-year profit forecast, a 23% reduction from the previous value. The target price corresponds to 21% upward space, and maintains an industry performance rating.
risks
Global NEV sales fell short of expectations, and increased market competition led to a decline in profits.