Report guide
The company is the leader of oxalic acid industry, transforming the business of lithium battery cathode materials. We believe that the company relies on BYD, Penghui and other battery head enterprises, fully benefit from the demand for lithium iron phosphate, high production can expand flexibility to boost performance growth. Synchronous layout of high-nickel materials research and development, to build a secondary growth curve.
Main points of investment
Oxalic acid industry leader, transforming lithium battery cathode material
The company is one of the top five oxalic acid suppliers in China, with a market share of nearly 20%. After 2016, the company began to transform the lithium battery cathode material business. As of 2021Q3, it has a production capacity of 10,000 tons of lithium iron phosphate and 5000 tons of conventional ternary production capacity, with a total production capacity of 200000 tons under construction and planning. 2021Q1-Q3 achieved revenue of 547 million yuan (+ 105%), of which the revenue of cathode materials business accounted for 53.37% in the first half of the year; the net profit was 38.69 million yuan, turning losses into profits; and the gross profit margin was 14.98% (+ 6.18pct).
The phosphorus and iron demand window opens, and the high nickel permeability continues to increase.
At the end of 2020, the total production capacity of domestic mainstream cathode manufacturers is 680000 tons, showing a structural oversupply; according to the production expansion plan of leading enterprises, the domestic cathode materials will reach at least 2 million tons by the end of 2023, and the trend of oversupply continues. With the electrochemical energy storage construction on the ground, the demand for lithium iron phosphate turns on the second growth, and the demand for ferrophosphorus in head battery enterprises is gradually increasing; as a better performance power battery material, the ternary permeability of high nickel continues to increase.
Phosphorus and iron ternary two-wheel drive, BYD contributes core increment
The company also distributes lithium iron phosphate and ternary materials, and plans for a total of 200000 tons of cathode materials under construction and planning, enriching the product matrix to support channel expansion. The company continues to introduce quality customers: the company introduced benchmark customer BYD in 2021, Q3 BYD accounted for nearly 50% of the supply volume, signed an order of 800 million yuan with Penghui Energy in November. The capacity utilization rate of 2021Q3 is more than 80%, which is significantly higher than that in the first half of the year. We believe that the company is expected to rely on high-quality customers to expand downstream channels and rely on BYD to continue to improve capacity utilization. Scale effect is expected to be realized gradually.
Profit forecast and valuation
It is estimated that the company's revenue from 2021 to 2023 will be 8.3gamma 36.6 / 7 billion yuan, an increase of 132% 343% gamma 91% over the same period last year, and the net profit returned to its mother is 0.5 gamma 2.5 / 560 million yuan, an increase of 255%, 456% and 124% compared with the same period last year, and the corresponding EPS is 0.25max 1.09max 2.43 yuan. The current price corresponds to PE128/23/10 times, based on the strong flexibility of the company's capacity expansion, backed by the core customer BYD, scale effect is expected to be realized, given the target price of 46.45 yuan, given the "overweight" rating.
Risk hint: the expansion of production is not up to expectations; the demand for cathode materials is not up to expectations.