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Yang Die, reporter of Yangtze Business Daily Pentium News

As the downstream market recovered, Zhongke Electric (300035.SZ) turned its operating performance from loss to profit.

On the evening of July 17, Zhongke Electric announced its performance forecast, the company expects to achieve a net profit of 56.21 million yuan to 74.95 million yuan in the first half of the year, a loss of 125 million yuan in the same period last year; non-net profit of 76.58 million yuan to 93.23 million yuan, a loss of 111 million yuan in the same period last year. Both items have achieved year-on-year turnaround.

As for the main reason for the expected profit, Zhongke Electric explained that in the first half of the year, the demand from downstream customers increased, and the company's negative electrode material production and sales both increased significantly year-on-year. At the same time, the effects of cost reduction and efficiency improvement measures continued to be released, resulting in a significant improvement in the current period's operating performance year-on-year.

Zhongke Electric was established in April 2004. The company's main business consists of two major sectors, namely lithium battery negative electrode business and magnetoelectric equipment business. In December 2009, the company was listed on the Shenzhen Stock Exchange's Growth Enterprise Market.

Looking back at the development history of Zhongke Electric, we can find that the company's operating performance improved rapidly after it became involved in the lithium battery negative electrode business.

Specifically, Zhongke Electric was previously mainly engaged in the business of magnetoelectric equipment, and its products include special equipment for electromagnetic metallurgy, industrial magnetic equipment and special equipment for lithium batteries. Since 2017, the company has successively acquired 97.65% of the shares of Xingcheng Graphite, 100% of the shares of Grete, and 37.50% of the shares of Jieneng New Materials, thus entering the field of lithium battery negative electrode business. The company's main products are lithium-ion battery negative electrode materials, which are mainly used in power, energy storage, consumer lithium-ion batteries and other fields.

Since then, Zhongke Electric's lithium battery negative electrode business has grown rapidly. From 2017 to 2023, Zhongke Electric's lithium battery negative electrode segment achieved operating income from 234 million yuan to 4.519 billion yuan, an overall increase of 18.31 times in six years, and its revenue share also increased from 55.6% to 92.07%.

Before entering the lithium battery negative electrode business, Zhongke Electric's non-GAAP net profit had never exceeded 50 million yuan. Since 2018, the company's non-GAAP net profit has been as low as 100 million yuan, and it soared to 460 million yuan in 2022.

However, by 2023, due to the decline in the market sales price of the company's main product, graphite negative electrode materials, and the cost pressure brought by the consumption of high-priced inventory, Zhongke Electric's operating performance fell three times. This year, its operating income, net profit, and non-net profit were 4.908 billion yuan, 41.71 million yuan, and 93.49 million yuan, respectively, down 6.64%, 88.55%, and 79.67% year-on-year, respectively.

Thanks to the company's series of cost-cutting and efficiency-enhancing measures, Zhongke Electric's performance decline has been rapidly reversed this year. In the first quarter of this year, the company achieved operating income of 1.066 billion yuan, a year-on-year increase of 2.38%; net profit of 23.7675 million yuan, turning losses into profits year-on-year, compared with a loss of 135 million yuan in the same period last year. Combined with the performance forecast data, Zhongke Electric's performance in the second quarter maintained steady growth, with a single-quarter net profit range of 32.4425 million yuan to 51.1825 million yuan, a significant year-on-year increase of 212.55% to 393.09%.

Data shows that Zhongke Electric's operating costs in the first quarter were 880 million yuan, a year-on-year decrease of 8.23%, accounting for 82.55% of the company's total revenue. This figure was 92.15% in the same period of 2023, a year-on-year decrease of 9.6 percentage points.

In addition, Zhongke Electric also actively shares its development achievements with investors. According to statistics from the Yangtze Business Daily Pentium News reporter, the company has distributed dividends 14 times since its listing, with a total dividend amount of 636 million yuan.