Description of the event
The company achieved revenue of 1,573 million yuan in Q1 2022, +51.82% year on year, +37.26% month on month; achieved net profit of 174 million yuan, +73.69% year on year, -1.88% on month; and achieved net profit of 226 million yuan after deducting non-return to the mother, +5.67% year on year, +49.92% month on month.
Incident comments
The price of cobalt increased month-on-month, and copper-cobalt production capacity was gradually released. Copper prices remained stable in Q1 2022, and cobalt prices rose sharply month-on-month:
The average prices of SHFE copper, cobalt metal, cobalt powder and cobalt intermediates were 71,558 yuan/ton, 520,000 yuan/ton, 621,000 yuan/ton, and 30 US dollars/pound, respectively +14%, +54%, +59%, +79%, +79%, +2%, +22%, +22% over the previous month.
With the company's 6,000-ton electrolytic copper project being put into operation at the end of 2021, Anhui Hanrui's 5,000 ton cobalt powder expansion production line was put into operation in January 2022. The company's 202Q1 production and sales may have increased month-on-month, which in turn led to the company's revenue of +37.26% month-on-month. In 202Q1, the company achieved gross profit margin of 28.53%, -3.15pct month-on-month, net profit margin of 11.03%, -4.41pct month-on-month, minus 4.7% non-ROE, +1.46pct month-on-month. On the one hand, new production capacity is climbing, and the overall cost may be too high, leading to a slight decrease in Q1 gross margin. On the other hand, 2022Q1 lost 72.8 million yuan from changes in fair value, mainly its shares in Funeng Technology, which dragged down net profit to a certain extent, but judging from net profit not returned to the mother, it achieved a nearly 50% increase over the previous month. At the same time, as of Q1 2022, the company's advance payments increased by 200 million yuan, mainly due to the company's increased procurement.
The project under construction went smoothly, and copper-cobalt production capacity will be further increased in 2022. The company converted the “5,000 tons of electrolytic cobalt” in the fund-raising project into a “6000 ton electrostatic copper” production line, which was put into operation at the end of 2021; processes such as cobalt deposition, pressure filtration, and flash steam were added to the original production line, and converted it into a “5,000 ton cobalt hydroxide” production line, which is expected to be put into operation in the second quarter of 2022. The technical improvement and expansion project for Anhui Hanrui's annual metallurgical cobalt powder production line with an annual output of 5,000 tons was officially put into operation in January 2022. The first phase of the Ganzhou Hanrui infrastructure project has basically been completed. Equipment installation is currently underway. It is expected to be officially put into operation by the end of June 2022.
The expansion of production capacity is gradually being implemented, and we are optimistic about the elasticity of the company's performance under the fluctuation of high metal prices. The tight supply and demand pattern for cobalt will continue in 2022, while the African pandemic and extreme weather will continue to disrupt inland and maritime logistics. In the context of low inventories, cobalt prices are expected to fluctuate at a high level, and the average annual cobalt price is expected to reach more than 400,000/ton, up from last year. At the same time, against the backdrop of rising global energy prices and continuous supply-side disturbances, the hidden cost of copper has risen, and copper prices have remained optimistic throughout the year. As the company's various projects under construction climbed into production, the company's performance was highly elastic in the context where overall metal prices remained high. In the future, the company will also increase its allocation of new energy resources. With the help of the later Hong Kong stock IPOs, it is also worth looking forward to the company increasing its new energy strategy. It is estimated that in 2022-2024, the company's net profit to the mother will be 1,197, 1,266 million yuan, and 1,346 billion yuan respectively. Corresponding to PE12.05X, 11.39X, and 10.71X, it is recommended to pay attention.
Risk warning
1. Supply release was higher than expected, and prices fell;
2. Downstream demand fell short of expectations, and the company's product sales fell short of expectations.