Incident: The company issued several announcements such as the “Strategic Cooperation Agreement” and the “2022 Non-public Stock Issuance Plan”.
Production of lithium battery cathode materials will be expanded by another 200,000 tons, supporting production capacity for lithium salt and iron phosphate to achieve self-supply of raw materials. The company issued an announcement and signed a “Strategic Cooperation Agreement” with the Yunnan Yuxi Municipal Government to invest 200,000 tons of lithium battery cathode materials in Yuxi. The project is divided into three phases. The first phase initially invests 1 billion yuan to build an annual output of 50,000 tons of lithium iron phosphate cathodes and 1,000 tons of clay lithium extraction pilot line. After the pilot line is verified, it will support the construction of 50,000 tons/year lithium salt production capacity and 200,000 tons/year iron phosphate production capacity. The company strategically lays out lithium extraction and iron phosphate precursors from clay to achieve integrated expansion of the industrial chain, ensures independent supply of upstream raw materials and controllable material costs, which is expected to further consolidate the company's long-term competitive advantage.
Two high-quality customers in the fields of power and energy storage, BYD and Penghui Energy have been deeply cooperating, and demand from downstream customers has increased. Since the company passed the BYD supplier certification in mid-2021, it has developed close and in-depth cooperation with BYD. In 2021 as a whole, BYD sold a total of 603,800 new energy vehicles, an increase of 218% over the previous year; the total installed power battery was 25.06 Gwh, accounting for 16.2% of the domestic market. In 2022, BYD will launch a large number of new cars one after another, further stimulating the market's consumption potential. The continuous release of the company's new production capacity is in line with the needs of downstream customers, and cooperation between the two sides is expected to continue to deepen. Penghui Energy is a leading enterprise in the field of energy storage. It was previously announced that it signed a “Cooperation Agreement” with Fengyuan. The two parties clearly agreed that Penghui Energy will purchase lithium iron phosphate and lithium nickel-cobalt-manganate (nickel 5 series, high nickel 8 series) products from Fengyuan from December 2021 to December 2022. The total contract amount is about 800 million yuan, which is of great significance to the growth and certainty of the company's revenue in 2022.
A fixed increase of 940 million yuan was raised to speed up production capacity construction, and the participation of actual controllers in the subscription showed long-term confidence. The company plans to raise no more than 940 million yuan. After deducting the issuance fee, it will mainly be used for the construction and working capital replenishment of the 50,000 ton lithium iron phosphate cathode project in Anqing. Zhao Guanghui, the controlling shareholder and actual controller of the company, promised a subscription amount of 30 to 90 million yuan, demonstrating the actual controller's full confidence in the company's long-term development.
The company is actively promoting production capacity, and iron lithium production capacity is expected to reach 75,000 tons by the end of 2022, exceeding previous expectations. In line with downstream customer needs, the company has accelerated production capacity construction and is currently planning a total production capacity of 350,000 tons of cathode materials. By the end of 2022, iron lithium production capacity is expected to reach 75,000 tons, and the three-yuan production capacity is expected to reach 15,000 tons. The construction progress has exceeded previous expectations.
Profit forecast and valuation: The company's profit forecast is revised. It is estimated that the company will achieve net profit of 0.52/2.24/598 million yuan respectively in 2021-2023, up 277.9%/330.5%/167.5% over the previous year. The current stock price corresponding to PE is 107.6/25.0/9.3 times, respectively. Maintain a “buy” rating.
Risk warning: production capacity construction progress falls short of expectations; downstream demand falls short of expectations; risk of increased industry competition; risk of tight supply of upstream raw materials;