On the evening of April 18, EVE announced its annual results for 2023. The company's battery market share has doubled, but it has fallen into the dilemma of diverging revenue, net profit and sales.
In 2023, EVE will achieve operating income of 48.78 billion yuan, a year-on-year increase of 32.38%, and net profit attributable to the parent company of 4.05 billion yuan, a year-on-year increase of 15.42%, of which the net profit of the main business will be 3.54 billion yuan, a year-on-year increase of 30.19%, a year-on-year increase of only 2.23%, a year-on-year increase of 17.04%, a year-on-year increase of 0.61 percentage points, and a net profit margin of 9.27%, a year-on-year decrease of 0.84 percentage points.
Although EVE's installed capacity of lithium power batteries still maintains triple-digit growth, the growth rate is the first, but the growth rate of operating income and net profit is only 32% and 15.4%.
Wall Street Insight Research believes that the mismatch between revenue and profit and installed capacity growth is mainly due to the battery price war and the decline in investment income.
1. The deviation between installed capacity, market share and profit growth
In 2023, in the context of the battery price war, EVE will increase its market share by cutting prices, but it will also slow down significantly due to the larger price reduction.
In 2023, EVE's domestic installed power battery capacity will reach 17.26GWh, a year-on-year increase of 140%, and its market share will increase by 2.01 percentage points to 4.45%.
From the perspective of the global power battery market, EVE's global installed capacity in 2023 will reach 16.2GWh, a year-on-year increase of 129.8%, and its market share will increase by 0.9 percentage points to 2.3%. This is also the first time that EVE has entered the top 10 list of global power battery installed capacity.
However, it is worth noting that the rapid increase in EVE's market share and installed capacity has not been translated into revenue and profitability growth. In 2023, EVE's revenue and net profit growth rates will only be 32% and 15% respectively, far lower than the growth level of installed capacity.
According to Wall Street Insight Research, there are several reasons for this:
First, in 2023, EVE's investment income will be cut in half, with EVE's investment income falling by 51% to 600 million yuan due to SMOORE's profit plummeting by 34.5%.
Second, EVE's strategy of reducing prices and ensuring volume failed to convert market share into revenue and profit.
For the whole year of 2023, the prices of lithium iron phosphate batteries and ternary lithium batteries will fall by 52% and 44%, respectively. Obviously, the company's bargaining power for terminal car manufacturers is weaker, and the decline in raw materials has not been able to translate into the company's earnings.
2. Power batteries are facing the challenge of overcapacity, and energy storage batteries are still growing at a high rate
In 2023, EVE will revise its business classification from lithium primary battery business and lithium-ion battery business to consumer battery business, power battery business and energy storage battery business with clearer business information.
(1) Power battery business
EVE's power battery business is the company's main source of revenue, with shipments reaching 28.08GWh in 2023, a year-on-year surge of 64.22%, driving operating income to 23.98 billion yuan, an increase of 31.41%. Despite the significant increase in shipments, the price war led to a 1.59 percentage point decrease in gross margin to 14.37%, and capacity utilization also decreased from 91.5% to 86.6%. This is also the reason why revenue growth is weaker than shipments.
However, the company remained active in expanding production capacity, with fixed assets increasing by 100.3% year-on-year, with a total value of 21.75 billion yuan, and investment in projects under construction was 14.05 billion yuan, an increase of 5.68%. These data show that despite the challenge of overcapacity, EVE continues to invest in expansion.
(2) Energy storage battery
EVE's energy storage battery business is the company's second largest business segment and has achieved significant growth in 2023. Energy storage battery shipments reached 26.3WGh, soaring 121% year-on-year, ranking third in the world for two consecutive years, and the market share increased by 3 percentage points to 11%.
As most of the orders are long-term contracts, the energy storage battery business is less affected by the price war, with operating income reaching 16.34 billion yuan, a year-on-year increase of 73.24%, accounting for 33.5% of total revenue, and gross profit margin also increased by 8.07 percentage points to 17.03%.
(3) Consumer batteries
In contrast, EVE's consumer battery business is becoming less and less important.
In 2023, the operating income of this business will be 8.36 billion yuan, a year-on-year decrease of 1.78%, the gross profit margin will decrease by 0.95 percentage points to 23.73%, and the proportion of revenue will decrease to 17.1%. This shows that the consumer battery business is basically dependent on stock and is gradually losing its growth momentum.
3. Cash flow continues to improve, but it is necessary to be wary of the transfer of industry discourse
In order to maintain market share, EVE has sacrificed profitability to a certain extent by implementing a significant price reduction strategy. Despite this, the company's cash flow position continued to improve, with net operating cash flow reaching 8.676 billion yuan in 2023, a year-on-year increase of 203%, setting a new record.
However, judging from the company's accounts receivable turnover days and contract liabilities throughout the year, the company's voice is gradually shifting to end customers, and the overall order level has also declined.
In 2023, EVE's contract liabilities will drop sharply by 58.9% year-on-year to RMB397 million, which is the first negative growth in contract liabilities in the past three years, and the number of days of accounts receivable turnover will exceed 90 days for the first time, reaching 92.38 days.
Although it can still achieve market share growth in the fierce price war, the mismatch between revenue growth and profit growth, the reduction of investment income and the subtle transfer of industry discourse power have brought uncertainty to the future development of EVE.
Looking to the future, whether EVE can successfully overcome these challenges and get out of the predicament will be the focus of market attention.
This article is from Wall Street News, welcome to download the APP to see more