Key points of investment
Industry concentration continues to increase, and the leading domestic lead-acid battery business achieved revenue of 44.407 billion yuan in 2023, with a year-on-year increase of 18.75%, gross profit margin of 18.84%, sales volume of 124.917,900 kVAH, an increase of 24.52% year-on-year, mainly in the short-haul delivery, express delivery industry and individual consumers' short trips to drive demand for electric light vehicles. According to the usage of electric light vehicles, the frequency of lead-acid battery replacement every 2 years made the electric light vehicle power market grow steadily and continuously. The lead-acid battery industry is further integrated, and the company's share of the domestic electric light vehicle lead-acid power battery market exceeds 45%, ranking first.
The lithium battery business declined due to inventory removal in the industrial chain. The company's strategic energy storage business achieved revenue of 904 million yuan in 2023, a year-on-year decrease of 45.00%, gross profit margin of -14.83%, sales volume of 1.4 GWh, a year-on-year decrease of 29.65%, mainly due to the continued decline in upstream raw material prices and the simultaneous decline in the price of finished batteries. Based on changes in the lithium battery market, the company strategically placed the energy storage business as one of the company's lithium battery development directions, and officially established the energy storage division in July 2023 to undertake the development strategy of the company's energy storage system ecosystem.
Fuel cells are put into operation, developing multi-type sodium electricity application modules. In terms of hydrogen power business, the company insists on vigorously improving the level of independent research and development of hydrogen energy, focusing on product research and development such as fuel cell engine systems, electric stacks, bipolar plates and membrane electrodes, providing integrated comprehensive energy solutions for hydrogen production, and using this to promote the expansion of buses and municipal vehicles. The company's 40 fuel cell system buses have been put into operation in Shuyang, Jiangsu. In terms of sodium-ion battery technology, the company developed different types of sodium-electric application modules based on different application scenarios, and released the next-generation sodium ion battery Tiansodium T1 for two-wheelers. In addition, the company also collaborated with relevant enterprises in the industrial chain to jointly initiate the establishment of a sodium-ion battery industry ecological alliance for collaborative and efficient development.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. The company is a global leader in lead-acid batteries, benefiting from the steady growth of the downstream electric light vehicle market and strategically arranging the energy storage business. Considering that the supply side of the lithium battery industry is in a competitive stage, we lowered the company's profit forecast for 2024-2025. We expect the company's net profit to be 25.76 billion yuan and 2,791 billion yuan respectively (30.77 billion yuan and 3.72 billion yuan before the reduction, respectively), and the net profit forecast for 2026 is 3.161 billion yuan, corresponding to EPS of 2.65, 2.87, and 3.25 yuan/share. The PE corresponding to the current stock price is 11, 10, and 9 times, respectively. Maintain a “buy” rating.
Risk warning
Demand for electric light vehicles falls short of expectations; expansion of new production capacity falls short of expectations; risk of large fluctuations in raw material prices.