The company released its 2023 annual report and 2024 quarterly report: in 2023, it achieved operating income of 30.53 billion yuan, +3.9% year on year, realized net profit to mother of 9.3 billion yuan, -27.9% year on year, and realized net profit after deduction of 240 million yuan, or -119.9% year on year. 2024Q1 achieved operating income of 8.35 billion yuan, +36.3% and -18.9% year-on-month respectively, and realized net profit of 460 million yuan, +164.5% and +17.9% year-on-year respectively, and realized net profit without return to mother of 380 million yuan, +333.0% year over year, turning loss into profit.
Accrued asset impairment dragged down Q4 profits. 23Q4 deducted non-net profit of $70 million, mainly due to asset impairment losses of 770 million yuan, and a sharp increase in non-recurring profit and loss in 23Q4, mainly due to confirmed net income of 1.27 billion yuan from changes in fair value in the fourth quarter.
24Q1 results exceeded expectations. Shipments of tertiary precursors were 510,000 tons (annual target of 220,000 tons), +113.7%; shipment volume of cobalt tetroxide was 60,000 tons (annual target of 25,000 tons), +293.4%; the Indonesian nickel resource project produced and sold 105,000 tons of nickel metal MHP (annual target of 60,000 tons), achieving 30% overproduction, +133.3% year over year; recycling and dismantling power batteries of 0.79 million tons (0.88 GWh, annual target of 45,000 tons), +27.5% year over year.
Indonesia's Qingmeibang nickel resource project has entered the harvest period. In 2023, 27,000 tons of metal were shipped, and the nickel-cobalt-manganese recovery rate reached more than 95%. The company fully launched the second phase of the Indonesian nickel resource project, increasing production capacity from the planned total volume of 123,000 tons to 150,000 tons, of which the company controlled 110,000 tons. The subsidiary QMB achieved operating income of 3.04 billion yuan and net profit of 860 million yuan in 2023. The estimated total cost per unit was 810,000 yuan/nickel ton (about 11,000 US dollars/nickel ton), and there is still room for further reduction as the project overproduction costs.
Seize new trade-in opportunities. On March 13, 2024, the State Council officially released the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”. The company's huge waste product recycling network layout, the world's leading green recycling technology and urban mining system will successfully connect with this new round of historical trade-in opportunities. Since March, the company has successively reached relevant strategic cooperation agreements with Midea, JD, Dongfeng Motor, SF Express, etc.
Investment advice: The company is expected to achieve net profit of 18.21/23 billion yuan in 2024-2026, corresponding price-earnings ratios of 20/17/15 times, respectively, maintaining a “highly recommended” investment rating.
Risk warning: New energy vehicle sales fall short of expectations, risk of changes in technology routes, large fluctuations in cobalt and nickel prices, new project construction falling short of expectations, risk of safety accidents, etc.