Introduction to this report:

The company's performance requirements have been better than expected for 24 years. In the long run, the company's three-yuan production capacity and product layout such as hydrogen energy materials and lithium iron phosphate are expected to contribute to the driving force of performance.

Key points of investment:

Maintain an “Overweight” rating. Considering the increase in new customers of the company's ternary cathode and the recovery in downstream demand for lithium cobalate, Shangxiu's 24-25 EPS was 1.36 (+0.01) yuan and 1.80 (+0.26) yuan, while adding a 26-year EPS of 2.27 yuan. Refer to the comparable company's 25-year XPE target price of 45.00 (+4.68) yuan.

24Q1 results exceeded expectations. In '23, the company achieved net profit of 527 million yuan, a decrease of 52.9%; net profit after deducting non-return to mother was 466 million yuan, a decrease of 52.4%. In Q1, the company achieved net profit of 111 million yuan, a decrease of 3.7% and a decrease of 3.5%; net profit without return to mother was 103 million yuan, up 4.3% from the same period, and 5.1%. Considering the shift in demand in the NEV industry from the peak season in the fourth quarter to the off-season in the first quarter, the company's performance in the first quarter changed better than expected.

Demand is growing faster than the industry, and the European market has a three-way layout. The company sold 72,100 tons of lithium battery cathode materials in '23; of these, ternary materials sold 37,400 tons, down 19.4% year on year, mainly affected by downstream inventory removal; lithium cobalate sales volume was 34,600 tons, up 4.2% year on year, and its leading position in the market was stable. 24Q1 achieved sales of 15,900 tons of ternary materials, up 249.5% year on year; sales volume of lithium cobalate was 0.84 million tons, up 62.5% year on year; mainly driven by new customers in the power sector and increased customer demand in the low-altitude and digital fields in '24. Overseas, the company set up a joint venture for ternary cathode materials and precursors in France to accelerate the development of overseas markets.

The product system is rich, and hydrogen energy may be a bright spot. The development and introduction of products such as lithium iron (manganese) phosphate, sodium electrodes, lithium cathodes for cathodes, and solid electrolytes is progressing smoothly. As a leading hydrogen storage alloy enterprise in the industry, the company independently develops solid hydrogen storage materials, benefiting from the development of the hydrogen energy industry.

Risk warning: NEV sales fall short of expectations, and sales of three-yuan high-voltage products fall short of expectations