The industry's leading manufacturer of high-nickel ternary precursors. Fangyuan Co., Ltd. focuses on the R & D, production and sales of high-nickel ternary material precursors. The actual control of the company is Luo Aiping and Wu Fang, who together control 28.81% of the shares of the company. NCA ternary precursor business is the company's largest business, accounting for 74% of NCA revenue in 2020, accounting for 74%. The gross profit margin of NCA ternary precursor in 2020 is 19%, and the profitability remains stable.
Focus on the high nickel ternary precursor and enter the Tesla, Inc. supply chain. The company focuses on the production of high nickel ternary precursors. In 2019, the high nickel ternary precursors NCA87 and NCA91 have become the company's core products, mainly for Panasonic to produce high energy density ternary lithium batteries. From 2018 to 2020, the export volume of the company's main product NCA ternary precursors ranked first in China. According to the statistics of Gao Gong Industry and Research, at present, the domestic enterprises that mass produce NCA precursors are mainly Grimmei and Fangyuan shares, accounting for about 45% and 28% of the domestic shipments of NCA precursors in 2019, respectively. Greengmei ranked first and the company ranked second.
The company has mastered the core technology of high nickel production, and has more advantages in product quality and cost than its peers. The company's patent represented by "extraction and non-extraction of nickel" has improved the technological process of the domestic nickel hydrometallurgy industry and reduced the manufacturing cost of high-purity nickel sulfate. From 2018 to 2020, the gross profit margin of the ternary precursor business of Fangyuan shares was higher than that of Rongbai Technology, Cologne Xineng, Zhongwei shares, long-term Lithium Group and Cedar shares, mainly because the company had a certain cost advantage in raw materials. In addition, the performance of the precursor products produced by the company is stable and consistent, in which the magnetic foreign body can be stably controlled within the 20ppb. The company plans to raise funds for the annual production of 50,000 tons of high-end lithium precursors (NCA, NCM) and 10,000 tons of battery lithium hydroxide projects. after reaching production, the company will further expand the production capacity of high-end ternary precursors and enhance the company's economies of scale and market competitiveness.
Profit forecast and valuation. We expect the company to achieve a net profit of 1.92,4.47 and 596 million yuan in 2021-23, with a corresponding EPS of 0.38,0.88,1.17 yuan per share. Considering the company's leading position in the field of high-nickel NCA precursors, the company was given a "better than the market" rating of 66-85X PE in 2021 with a reasonable value range of 25.08-32.3 yuan.
Risk tips. (1) the competition intensifies, which affects the company's market share and gross profit margin. (2) the price of raw materials fluctuates, which affects the gross profit margin. (3) the impact of the epidemic continues and affects the utilization rate of the company's production capacity.
