Event: the company announced that it intends to use self-raised funds to invest in the construction of projects with an annual output of 25000 tons of VC and 5000 tons of FEC. The project construction period is from October 2021 to December 2022, with a total investment of 450 million yuan. In this regard, our comments are as follows:

Electrolyte lithium hexafluorophosphate, LiFSI rights and interests production capacity further increased. VC (ethylene carbonate) is a film-forming additive in electrolyte, which can make solvent molecules preferentially form a dense SEI film on the surface of the negative electrode. With the increase of vinyl carbonate purity, the compactness of SEI film increases and the solvent consumption decreases, thus increasing the energy density and service life of lithium-ion battery. VC is one of the most scarce lithium materials at present, the core reason is that VC has high self-polymerization, and the self-polymerization phenomenon will increase with the increase of equipment capacity, which makes its purity difficult to meet the requirements of lithium batteries. Therefore, the current effective production capacity of VC in the industry is far lower than the total capacity. More importantly, the use of VC in lithium iron phosphate battery increased significantly compared with ternary battery, while lithium iron phosphate battery continued to grow faster than expected. Due to double reasons, the shortage of VC supply gradually intensified, and prices continued to rise during the year. At present, the long order price of VC has reached 300,000 to 350,000 yuan / ton, and the bulk price has reached 450 to 500,000 yuan / ton. Based on years of accumulation of distillation and purification technology and equipment foundation in the field of fluorine-containing fine chemicals, the company has a strong competitive advantage in the field of VC distillation purification and device magnification. After 25000 tons of VC is put into operation, it is expected to quickly fill the market gap and match the scheduling needs of downstream customers.

Create a scarce one-stop supply platform for electrolyte materials in the industry. The company is currently one of the most complete electrolyte material supply platforms in the industry. The company has normally produced high-quality lithium hexafluorophosphate and LIFSI (lithium difluorosulfonimide). Inner Mongolia Yongtai Construction's annual output of 5000 tons of VC (vinylidene carbonate) and 3000 tons of FEC (fluoroethylene carbonate) has entered the trial production stage, and the product quality indicators meet the requirements of downstream customers. In addition, the company has successfully developed other mainstream electrolyte additives with high quality, high efficiency and high performance, such as LiDPF (lithium difluorophosphate), LiDODFP (lithium difluorodioxalate) and so on. In the medium and long term, the discourse power of the industrial chain is expected to transfer to the electrolyte material link, and the company simultaneously distributes two kinds of electrolyte lithium hexafluorophosphate, LiFSI, and two mainstream additives VC and FEC, to achieve horizontal full coverage of mainstream electrolyte materials, and to build a "one-stop purchasing supermarket for electrolyte materials" for customers. In the future, benefiting from the deep cooperation with CATL, the leading manufacturer of power batteries, the company is expected to achieve continuous extension in the integration of product volume, product categories and industrial chain, with huge room for growth.

Investment suggestion: we estimate that the operating income of the company from 2021 to 2023 will be 44.50cm, 98.06pm, 130.07 billion yuan, respectively, the net profit of return to the mother will be 6.01x230pm, 3.508 billion yuan, respectively, and the corresponding PE will be 33.8, 9.1pm, 5.8 times respectively. Based on the accumulation of technology in the field of fluorine-containing fine chemicals, the company has rapidly expanded the production capacity of high value-added lithium materials such as VC to meet the capacity matching requirements of downstream customers and maintain the "buy" rating.

Risk hint: the new production capacity of lithium materials is not as expected, the price of lithium materials is falling, and the performance of traditional business is lower than expected.