Azure(SZ:002245) SINOLINK SECURITIES·2025-02-23 04:32Investment Rating - The report gives a "Buy" rating for the company with a target price of 19.25 RMB based on a 35X PE for 2025 [4]. Core Views - The company is a leading global player in small cylindrical batteries, with a recovery in its main tool battery business and an improvement in its LED segment, leading to a return to profitability [1]. - The company is expected to benefit from a significant growth trajectory in the BBU (Backup Battery Unit) market, which is projected to grow at a CAGR of 79% from 2024 to 2028 [2]. - The company has a strong competitive advantage due to its early entry into the BBU market and ongoing expansion into various applications such as transportation and robotics [2]. Summary by Sections Company Performance - The company experienced significant revenue recovery in 2024, with a forecasted net profit of 4.2 to 5 billion RMB, representing a year-on-year increase of 198% to 255% [4]. - In the first half of 2024, the company's revenues from lithium batteries, metal logistics, and LED segments were 11.1 billion, 11.6 billion, and 7.5 billion RMB, respectively, showing year-on-year growth of 79%, 14%, and 25% [15]. Tool Battery Segment - The tool battery segment has returned to an upward cycle, with demand increasing after a two-year downturn. The company expects a double-digit growth in tool demand in 2025 [2]. - The company’s sales volume for tool batteries was 3.9 billion, 3.1 billion, and 2.2 billion units from 2021 to 2023, with a projected increase in profitability due to stable lithium carbonate prices and rising demand [2]. Non-Tool Battery Segment - The BBU market is expected to see high growth, with the company positioned to capitalize on domestic substitution trends, potentially achieving ten times the profitability of traditional cylindrical batteries [2]. - The company is expanding its production capacity in Malaysia, with mass production expected in 2025, enhancing its competitive edge in the BBU market [2]. Metal Logistics and LED Segments - The metal logistics business is projected to generate revenues of 24 billion, 26 billion, and 27 billion RMB from 2024 to 2026, with a slight increase in profitability [3]. - The LED segment is recovering, with expected revenues of 17 billion, 19 billion, and 21 billion RMB from 2024 to 2026, driven by improved product and customer structures [3].