PUTAILAI(603659)：SLIGHT EARNINGS BEAT FURTHER EXPANSION ON ANODE AND DIAPHRAGM

In 1H22, Putailai achieved attributed net profit (ANP) of Rmb1.396bn (+80.03 YoY), and ex-one-off ANP of Rmb1.333bn (+86.18% YoY); the 2Q22 ANP was Rmb759mn (+72.43% YoY), and ex-one-off ANP was Rmb720mn (+78.56% YoY). Despite the rise of materials prices, the anode business bucks the trend and other businesses maintain steady growth. To enhance its presence in the lithium-ion battery (LIB) value chain, the Company is also planning a private placement to issue more than 209mn shares and raise no more than Rmb8.5bn, which will mainly be used for the 100ktpa anode integration project and the base film coating integration project with an annual capacity of 960mn sq.m. We are optimistic about the long-term competitiveness of Putailai and maintain the "BUY" rating.
Event: On Jul 27, 2022, Putailai released 1H22 earnings, recording revenue of Rmb6.895bn (+75.76% YoY), and ANP of Rmb1.396bn (+80.03 YoY). We comment as follows:
Ex-one-off ANP of Rmb1.333bn(+86.18% YoY) in 1H22 slightly beat expectations.
In 1H22, the Company achieved revenue of Rmb6.895bn (+75.76% YoY), ANP of Rmb1.396bn (+80.03% YoY) and ex-one-off ANP of Rmb1.333bn (+86.18% YoY), slightly beating expectations. In quarterly terms, the 2Q revenue was Rmb3.764bn (+72.38% YoY), ANP was Rmb759mn (+72.43% YoY), and ex-one-off ANP was Rmb720mn (+78.56% YoY). The rapid growth in 1H22 performance is mainly due to the continuous strong demand in the downstream energy storage market, the rise of Company’s graphitization self-supply ratio and robust shipments of multiple businesses. The 1H22 net operating cash flow was Rmb345mn (-71.36% YoY).
Stable gross profit margin (GPM) due to integration, continuous control of financial expenses.
In 1H22, the Company’s comprehensive GPM was 37.45% (+0.5ppts YoY). In quarterly terms, the comprehensive GPM was 36.39%（-2.4ppts QoQ). During the period, the price of raw materials rose significantly and the capacity of graphitization was tight, yet the Company maintained stable GPM by increasing the proportion of self-supply in key links, etc. The expense ratio during 1H22 was 11.0% (-1.5ppts YoY). By quarter, the expense ratio during 2Q22 was 10.4%, and the quarterly selling/administrative/R&D/financial expense ratios were 1.0%/4.6%/5.2%/-0.4% (-1.6/0.9/-0.2/-0.5ppts YoY, respectively). The administrative expense ratio rose mainly because of the Company's business expansion and increase in the number of employees.
The shipments of multiple businesses bucked the trend, with a spin-off listing plan for the LIB business.
In 2Q22, Despite the impact of the pandemic in some area, the Company maintained high revenue growth. 1) In 1H22, the anode business achieved revenue of Rmb3.204bn (+30.59% YoY) and shipments of 55kt (+21.56% YoY). The ASP was Rmb58.3k/t (up Rmb4.1k/t YoY). The graphitization business posted revenue of Rmb651mn (+35.48% YoY). 2) The diaphragm business achieved revenue of Rmb1.579bn (+76.47% YoY) and shipments of 1729mn sq.m (+116.67%), mainly due to robust downstream customer demand that drove shipments to beat expectations; the unit price was Rmb0.91/sq.m (down Rmb0.21/sq.m YoY), and the price change was because the growth rate of the coating business is higher than base film business. 3) The LIB equipment business realized revenue of Rmb1.05bn (+93.11% YoY) mainly backed by the Company’s outstanding advantages in technology, management ability and service ability. It actively explored the overseas market when accelerating the domestic construction progress.
Meanwhile, to better integrate resources, the Company planned to spin-off and list Jiangsu Katop, its holding subsidiary specialized in lithium battery equipment.
Private placement to enhance layout in the anode and diaphragm businesses.
On Jul 27, the Company announced the plan of a private placement to issue no more than 209mn shares to raise no more than Rmb8.5bn, which will be primarily used for the 100kt/y anode integration project, the 960mn sq.m/y base film coating integration project and supplementing liquidity. Among that, Rmb3.89bn will be invested in the anode integration project (involving total investment of Rmb4.81bn), and Rmb2.374bn will be invested in the base film coating integration project with an annual capacity of 960mn sq.m (involving total investment of Rmb4.81bn). As a platform enterprise in the LIB industry with rapid development, the Company is able to continuously improve the market share with the high-quality products (in 2021, the market share of the Company's diaphragm coating business was 35.2%, up 8.5ppts YoY), while the production capacity has been in short supply for a long time. The implementation of relevant projects will further optimize the construction of anode materials and diaphragm industrial clusters, improve the profitability of the Company, consolidate its leading position in the industry, and enhance the synergy between its businesses.
Potential risks
Lower-than-expected market demand for NEVs; a drop in GPM due to raw material price hikes; intensified competition and sharp decline in prices brought by accelerated capacity expansion in the anode industry; the environmental approval of the investment projects missing expectations; the progress of capacity construction missing expectations.
Investment recommendation
As a leading company in the artificial graphite industry, Putailai will likely continue to benefit from the exponential growth of NEVs and maintain an uptrend in multiple segments. Considering its robust earnings growth that bucked the trend of soaring raw material prices in 1H22, we maintain our ANP forecasts at Rmb3.051bn/4.089bn/5.97bn for 2022E/23E/24E, corresponding to EPS forecasts of Rmb2.19/2.94/4.29. As a leading artificial graphite material manufacturer with global competitiveness, Putailai has become the supplier of a number of lithium battery leaders at home and abroad. With the rapid growth of downstream demand, we see high visibility of earnings growth considering the estimated costs cut brought by the shipments ramp-up due to the production capacity expansion and value chain consolidation. Given Putaitai’s leading position in the anode sector, we take the valuation of other comparable sector leaders as a reference, i.e., 32x 2023E PE for CATL (300750) and 27x 2023E PE for Energy New Material (002812) (both from Wind consensus estimates), and factor in the earnings growth forecasts of the Company, thereby assigning 35x 2023E PE to Putailai to maintain the target price of Rmb103. Reiterate the “BUY” rating.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。