Contemporary Amperex Technology (300750.SZ) expects a significant increase in net profit, surpassing 40 billion! Institutions: Stock price severely undervalued.

On the evening of January 30th, Contemporary Amperex Technology (300750.SZ) announced that it expects a net profit attributable to shareholders listed in 2023 of 42.5 billion yuan to 45.5 billion yuan, an increase of 38.31% to 48.07% compared to the previous year. This is the first time that Contemporary Amperex Technology's annual net profit exceeds 40 billion yuan. The net profit after deducting non-recurring gains and losses is expected to be 38.5 billion yuan to 41.5 billion yuan, an increase of 36.46% to 47.09% compared to the previous year. The main reason for the significant year-on-year increase in performance, according to Contemporary Amperex Technology, is that the domestic and foreign new energy industries maintain a fast growth rate, and the market for power batteries and energy storage industries continues to grow. The trend of transitioning to clean energy under the "dual-carbon" goals is becoming clear. As a global leading new energy innovative technology company, the company has continuously launched industry-leading product solutions and services by increasing research and development investment and innovation. During the reporting period, the company's new technologies and products were launched one after another, overseas market expansion accelerated, customer cooperation deepened, and both production and sales volume grew rapidly, achieving good economic benefits. Both domestic and foreign vehicle volumes are ranking first and are expected to continue growing in the future. Data shows that in the first three quarters of last year, Contemporary Amperex Technology achieved revenue of 294.6 billion yuan and a net profit of 31.1 billion yuan. Based on this calculation, the company's net profit in the fourth quarter of last year was 11.4 billion to 14.4 billion yuan. As the year-on-year base gradually increases in 2022, the net profit growth rate of Contemporary Amperex Technology is decreasing from 154% in the first half of the year to the expected 38% to 48% for the whole year. It is worth mentioning that signs of a slowdown in Contemporary Amperex Technology's performance growth rate appeared in the third quarter of last year. In that quarter, it achieved revenue of 105.4 billion yuan, a year-on-year increase of 8.28%, which was the lowest growth rate in a single quarter in three years. The net profit was 10.4 billion yuan, an increase of 10.66% year-on-year, but a decrease of more than 4 percentage points compared to the previous quarter. In the context of the imbalance between supply and demand in the lithium battery industry chain, the price of lithium batteries has been cut in half over the past year, which is an important reason for the slowdown in Contemporary Amperex Technology's revenue and profit growth. Contemporary Amperex Technology's business includes four major sectors: power batteries, energy storage batteries, battery materials and recycling, and battery mineral resources. In the first half of last year, the power battery sector contributed 73% of the company's revenue. According to the latest statistics from the China Shipbuilding Industry Group Power Battery Industry Innovation Alliance, from January to December 2023, China's cumulative power battery installed capacity reached 387.7GWh, an increase of 31.6% compared to the previous year. Among them, the cumulative installed capacity of ternary batteries was 126.2GWh, accounting for 32.6% of the total installed capacity, an increase of 14.3% year-on-year. The cumulative installed capacity of lithium iron phosphate batteries was 261.0GWh, accounting for 67.3% of the total installed capacity, an increase of 42.1% year-on-year. Among them, Contemporary Amperex Technology ranks first with an installed capacity of 167.1GWh, with a market share of 43.11%, surpassing BYD Company Limited by 15.9 percentage points. In terms of ternary power batteries, Contemporary Amperex Technology ranks first with an installed capacity of 78.33GWh, with a market share of 62.08%, surpassing CALB, the second-place, by 50.18 percentage points. According to data released by overseas institution SNE Research, globally from January to November 2023, the registered installed capacity of electric vehicles (EV, PHEV, HEV) reached approximately 624.4GWh, a year-on-year increase of 41.8% compared to the same period in 2022. Among them, Contemporary Amperex Technology ranked first with an installed capacity of 233.4GWh, a year-on-year increase of 48.3%, and a market share of 37.4%, an increase of 1.7 percentage points from the previous year's 35.7%, and an increase of 0.5 percentage points from 36.9% in January to October. It is the only battery supplier in the world with a market share of over 35%. SNE Research analysis indicates that Contemporary Amperex Technology's batteries are widely used in new energy passenger car models such as Guangzhou Automobile Group's Aion Y, GEELY AUTO's Jikey001, Tesla's Model 3/Y, BMW's iX, and Mercedes-Benz's EQS. The sales volume continues to be high, and it is expected to show a growth trend in the future. Multiple layout strategies, partnering with DiDi, BYD Company Limited, Ford, etc. On January 29th, Contemporary Amperex Technology announced the establishment of a joint venture company with DiDi Chuxing and its digital energy service platform Xiaoju Energy, to provide efficient battery swapping services for new energy vehicles. Xiaoju Energy has formed a strategic cooperation intention with Contemporary Amperex Technology to promote cooperation in a wider range of new energy fields such as integrated storage and charging. Contemporary Amperex Technology said that with the establishment of this battery swapping joint venture company, the two parties will closely cooperate to quickly scale up the deployment of battery swapping stations, promote the adoption of battery swapping vehicle models, improve the operational efficiency of the public replenishment market, and promote green transformation of transportation. As of the end of December 2023, Xiaoju Energy's charging service has covered more than 190 cities, providing cumulative charging services toThere were over 680 million times of electric vehicle services. Both parties emphasized that the public transportation market has the characteristics of a large user base, high frequency of energy supplementation, and high requirements for timeliness, making it one of the most valuable application scenarios for battery swapping services.On January 16th, Contemporary Amperex Technology announced on the interactive platform that the energy density of their solid-state batteries can reach up to 500Wh/kg. They are currently collaborating on the development of civilian electric passenger aircraft projects, implementing aviation-grade standards and testing to meet aviation-grade safety and quality requirements. They will also release an automotive-grade version of the solid-state battery. Experts say that the core of solid-state batteries is their ability to achieve superfluidity, superconductivity, stability, and superior conductivity. In simple terms, these batteries are more stable, have larger capacity, and faster conductivity. Currently, mainstream lithium-ion batteries have an energy density of about 250Wh/kg, while lithium iron phosphate batteries have an energy density of around 180Wh/kg. According to market reports, in order to maintain its market position, Contemporary Amperex Technology is streamlining production line resources, reducing costs, and promoting the adoption of 173Ah VDA-spec lithium iron phosphate battery cells with a standard 2.2C high-rate fast charging capability. It is expected that several car manufacturers will switch to this product by the middle of this year, with the cell price not exceeding 0.4 RMB per Wh. The company aims to target the market for electric vehicles priced between 100,000 and 200,000 RMB per vehicle. In addition, Contemporary Amperex Technology's fully-owned subsidiary, Times Green Energy, recently established two wind power companies, further expanding their presence in the wind power industry. At the 2024 Davos Forum in January, Contemporary Amperex Technology Chairman Zeng Yuqun revealed plans to promote the technology licensing cooperation model with Ford in Europe and the United States, which he sees as a way to address geopolitical challenges. Based on the cooperation plan announced by Contemporary Amperex Technology and Ford in February 2023, Ford will invest 3.5 billion USD in the construction of a battery factory in Michigan, USA, with full ownership. Contemporary Amperex Technology will provide construction and operation services, as well as authorize battery patent technologies. Regarding the stock market, after adjustments, on December 3, 2021, Contemporary Amperex Technology's stock price reached a peak of 381.34 RMB per share. Since then, the stock price has fluctuated and as of January 30, 2024, it stood at 140.75 RMB per share, with an overall decrease of 62.88%. In 2021, Contemporary Amperex Technology's market capitalization reached 1.6 trillion RMB, making it the second highest-ranked company in the A-share market, second only to Kweichow Moutai. However, the stock price has been continuously declining, and the company's path to reaching a trillion RMB market capitalization seems to be getting further away. Soochow Securities' chief analyst, Zeng Duohong, believes that the current perception of oversupply in the lithium-ion battery industry is temporary, with a potential turning point as early as this year. Based on the 2023 financial reports of major battery companies, capital expenditure is tightening and future capacity plans are slowing down. With financing channels becoming more restricted, the addition of new capacity in 2024 is expected to decrease further. The industry is expected to reach a turning point in the utilization rate of leading companies' capacity in the second half of 2024, with an expected improvement in industry capacity utilization in 2025. Currently, there is oversupply in lower-end lithium-ion battery capacity, while higher-end capacity will gradually gain market share, leading to an oligopoly. Higher-end capacity has advantages in terms of cost and quality, which will accelerate the exit of lower-end capacity. Companies such as Contemporary Amperex Technology will continue to dominate the market. A research report by Changjiang Securities suggests that the head capacity of lithium-ion batteries is not as oversupplied as believed. Contemporary Amperex Technology is expected to maintain a capacity utilization rate of 65%-70% from 2023 to 2024, which will recover to 75%-80% by 2025. An 80% capacity utilization rate is already quite high for the customized industry. The company's estimated net profit for 2024 is expected to exceed 45 billion RMB, and its current price-to-earnings ratio (PE ratio) is only 14x, with a PEG ratio of only 0.5x, indicating a severe undervaluation.