Key points of investment:
Holds Nanfu Battery and sets sail after asset restructuring
Consumer battery+energy storage two-wheel drive, clear strategic thinking. The company underwent asset restructuring in 2022. Previously, the company's main business was department store retail. In 2022, it acquired Nanfu Battery's parent company, Yajin Technology to achieve business transformation. Currently, its main business is R&D, production and sales of alkaline batteries. As of the 2024 quarterly report, the company holds about 26% of Nanfu Battery's equity. At the same time, the company invested in Hefu Energy's energy storage business, developed a second growth curve, and completed the consumer battery+energy storage two-wheel drive business layout.
In April 2024, the company issued the “Report on Issuance of Shares and Payment of Cash to Purchase Assets and Raise Supporting Funds and Related Transactions (Draft)”. It plans to issue shares and pay cash to purchase 31% of Anhui Anfu Energy Technology Co., Ltd., and plans to use Anhui Anfu Energy Technology Co., Ltd. as the implementing entity to purchase 5% of Ningbo Yajin Electronic Technology Co., Ltd.'s shares. After the completion of this major capital restructuring, the company is expected to hold about 42.91% of Nanfu Battery's shares. In the future, the company plans to continue acquisitions and increase the shareholding ratio, which is expected to further increase net profit to mother.
The absolute leading domestic market has significant advantages. Nanfu Battery is one of the few domestic consumer battery brands. With its own brand as its main business model, Nanfu Battery has been at the top of the sales list in the Chinese alkaline battery market for 31 consecutive years. The sales share of China's alkaline 5 and 7 battery retail market is 85.9%. Supported by strong product strength and brand strength, the company's average price and gross margin are at the leading level in the industry.
In recent years, the company has been actively developing overseas markets, and the export business has expanded rapidly. In 2023, Anfu Technology's export sales revenue reached 672 million yuan, +117.92% over the same period last year, and is expected to continue to contribute to growth in the future.
At the same time, the company increased the gross profit margin of the export OEM business through cost control and customer structure optimization. The gross margin of export sales reached 14.95% in 2023, +6.38pct compared to the previous year, and profitability continued to improve.
With the layout of the energy storage business, the prototype for the second growth curve is now
The company seizes industrial development opportunities. In July 2022, it jointly invested and established Hefu Energy with the energy storage team. The company held 40% of the shares and achieved main business revenue of about 311 million yuan and net profit of 376,400 yuan in 2023, with impressive business performance. Domestic and foreign markets are progressing hand in hand. Domestic efforts are being made to strengthen the “source network cargo storage” smart integration project, overseas countries are steadily promoting the construction of trade platforms, and speeding up entry into the main circuit of new energy sources. The prototype for the second curve has already appeared.
Profit forecasting and investment advice
The company's net profit for 2024-2026 is estimated to be 1.89, 213, and 239 million yuan, +63%, +13%, and +12% year-on-year respectively. The corresponding EPS is 0.90, 1.01, and 1.13 yuan, respectively, and the corresponding PE for 2024-2026 is 29x, 26x, and 23x, respectively. First coverage, giving a “buy” rating.
Risk warning
Raw material price fluctuation risk, technical risk, product substitution risk