On the evening of April 27, the company released its annual report and first quarter report. The revenue achieved in 2021 was 65.69/5.62/565 million yuan respectively, with a year-on-year ratio of +98.18%/828.18%/6851.57%. Among them, the revenue achieved in Q4 was 19.68/1.17/124 million yuan respectively, with a year-on-year ratio of +70.88%/82945.44%/425.45%. In Q1 2022, revenue, return to the mother, and non-deduction were 18.55/171/166 million yuan respectively, +73.58%/141.68%/135.58%, respectively, compared to the previous year, and the company's performance grew rapidly.

Profitability has increased significantly. In 2021, sales gross profit margin 23.34%, year-on-year +0.3pct, net sales margin 8.64%, year-on-year +8.4pct, of which Q4, sales gross margin was 17.85%, year-on-year -6.6pct, month-on-month, net sales margin 5.90%, year-on-year +5.83pct, -4.28pct month-on-month; Q1 2022, gross margin of sales 21.23%, year-on-year -6.46pct, month-on-month +3.38pct, year-on-year +2.71 pct, month-on-month 3.43 pct

Carbon materials are growing rapidly, consolidating their layout, and providing new growth points. In 2021, the company's carbon materials business orders were sufficient, the product structure was optimized, and product volume and price increased sharply, achieving revenue of 573 million yuan and gross profit margin of 25.40%. In June 2021, Foshan Dow increased Griffin's capital by 400 million yuan and changed Qingdao Haoxin to Grefen's wholly-owned subsidiary. In December of the same year, the company offered equity incentives to employees and transferred 5% of their shares in Griffin. In the same month, after increasing Griffin's capital by 200 million yuan, Foshan Dow changed Jiangmen Dow's and Ganzhou Haoxin to Griffin's wholly-owned subsidiaries. It is planned to produce 15,000 tons of slurry per year and 3,000 tons of carbon nanotube powder purification capacity in 2022. Of these, the 1,000-ton annual production capacity project will be tested in the first half of 2022. The company has already entered supplier systems such as Ningde Era, AVIC Lithium Battery, Yiwei Lithium Energy, and Zhuhai Guanyu, and the customer structure is even richer.

Precursors, cobalt salts, and copper continue to improve, and supply exceeds demand. In 2021, the company's precursor, cobalt, and copper business continued to improve. The supply of high-nickel products was in short supply, and the volume and price of products rose sharply, achieving revenue of 3.772 billion yuan and gross profit margin of 21.94 percent. Jiangxi Jiana was changed to a wholly-owned subsidiary of Guangdong Jiana, Guangdong Jiana was changed to a Wuhu Gana subsidiary, and strategic investors were brought in. In October 2021, MJM increased its capital to MMT, and MJM's shareholding ratio in MMT rose from 45% to 87.23%. The mining market, quantity, and price in Kolwezi, where MMT is located, has obvious advantages. The supply chain in the region is perfect, and costs are lower. The company has formed “Yingde+Longnan+Wuhu” three third-generation precursor production bases, and is equipped with cobalt-nickel salt production lines. The Anglo-German base has developed an annual production capacity of 32,000 tons of tertiary carbide, and the planned annual output of 12,000 tons of tertiary carbide is expected to be put into operation in the first half of 2022. After production is put into operation, the Anglo-German base will have an annual production capacity of 44,000 tons of tertiary carbide. The company will speed up the construction of the 50,000-ton 3000-ton carbon dioxide project for the first phase of the Longnan base project.

Investment advice: The company is an important producer of carbon materials for tertiary carbons and power batteries in China. The supply of tertiary drives is in short supply, carbon material technology is leading, powders are produced in-house, and the customer structure is reasonable, which is expected to contribute to new growth points. We expect the company's EPS for 2022/23/24 to be 1.30/1.81/2.35 yuan respectively, and the current stock price corresponding to 2022/23/24 PE is 12.7/9.1/7X respectively, continuing to maintain the “Highly Recommended - A” rating.

Risk warning: 1) macroeconomic fluctuations exceeded expectations; 2) the epidemic exceeded expectations;