Investment events

(1) In 2023, the company's revenue was 34.273 billion yuan, up 12.95% year on year; net profit to mother was 1,947 billion yuan, up 26.15% year on year; net profit after deducting non-return to mother was 1,587 billion yuan, up 43.13% year on year; it is planned to distribute 11.60 yuan (tax included) for every 10 additional shares transferred.

(2) In the first quarter of 2024, the company's revenue was 9.292 billion yuan, up 17.58% year on year; net profit to mother was 379 million yuan, up 11.19% year on year; net profit after deducting non-return to mother was 340 million yuan, up 34.64% year on year.

Key points of investment

In 2023, the company's share stabilized to rank first in the world, and the utilization rate of the three-precursor production capacity was high. In 2023, the company's battery material system (nickel, cobalt, phosphorus, sodium) products shipped more than 270,000 tons, an increase of more than 23% over the previous year. According to data from Xinyi News, the company's share of the market share of three-tier precursors in 2023 was 27%, ranking first in the industry. On the production capacity side, by the end of 2023, the company's three precursor production capacity was 280,000 tons, the production capacity was 45,000 tons, and the capacity utilization rate was 80%; iron phosphate was under construction with a production capacity of 200,000 tons, with an output of 43,000 tons. Furthermore, in 2023, the company's revenue from South Korea reached 6.962 billion yuan, an increase of 51.25% over the previous year; gross margin was 17.65%, 5.44 percentage points higher than domestic sales, and the share of overseas sales continued to increase.

Globalization is progressing steadily, and production bases in Korea and Africa are being laid out

In South Korea, the company signed a cooperation agreement with POSCO to build 50,000 tons of battery-grade nickel sulfate and 110,000 tons of precursors; in Morocco, the company signed a cooperation agreement with AI Mada, one of Africa's largest private investment funds, to establish a joint venture in Morocco to jointly build an integrated ternary precursor, lithium iron phosphate integration, a black powder recycling plant, and a Morocco-China green energy industrial park to achieve an annual output of 120,000 tons of ternary precursors, an annual output of 60,000 tons of lithium iron phosphate, and 30,000 tons of black powder recycling per year.

The integration of nickel resources is gradually deepening, and the OESBF production line is gradually climbing. Currently, the company's nickel resources in Indonesia have a production capacity of 195,000 metal tons. In addition to South Kalimantan, the three major bases in Morowali, Weidabe, and North Morowali have already been put into operation. The company's Feicui Bay Project and the Debon Project, which were built using an integrated ice and nickel process, were completed and put into operation, all with an annual output of 55,000 gold tons of low ice nickel after delivery; the company's world's first low ice nickel preparation OESBF production line officially entered the process optimization and production capacity climbing phase at the company's Qinzhou industrial base.

Profit forecasting and valuation

The profit forecast was lowered and the “increase in holdings” rating was maintained. Considering the slowdown in the electrification of overseas vehicles and the intensification of market competition, we carefully lowered the company's net profit from 2024-2025 to 2.114 billion yuan and 2,594 billion yuan (2,727 billion yuan and 3.40 billion yuan, respectively before the reduction), and added the 2026 forecast to 3,035 billion yuan. The corresponding EPS was 3.16, 3.87, and 4.53 yuan, respectively, and the corresponding PE was 17, 14, and 12 times, respectively, maintaining the “increase” rating.

Risk warning: Material prices fluctuate greatly, customer demand falls short of expectations, production capacity cannot be absorbed as expected, etc.