At this stage, the world is accelerating to enter a new era of green energy investment.

Among them, electric vehicles and energy storage are seen as two main battlefields, while lithium, once regarded as "industrial monosodium glutamate", has now become the "white oil" of the new energy era.

It is no exaggeration to say that whoever controls lithium will control the strategic resource base of the electric vehicle industry.

Tianqi Lithium Industry returns to Lithium Resource "Throne"

The "rise" of raw materials in the upper reaches last year fully confirmed this, especially the sharp rise in the price of lithium resources. due to the impact of the epidemic, the mismatch between supply and demand is still prominent. in just over a year, lithium carbonate and lithium hydroxide rose from 50, 000 yuan / ton to 500000 yuan / ton, a record high.

With the upward trend of lithium prices, listed companies of lithium resources have also stepped out of a large round of "Davis double-click" market: the quarterly results in 2021 and 2022 were booming, with revenue, net profit and stock prices all rising multiple levels. Among them, the industry leader Tianqi Lithium Industry (002466.SZ) not only turned losses into profits in the second quarter of last year, and performance growth is almost fully ahead of the industry, returning to the "throne".

Comparison of revenue and net profit between 2021 and 2022Q1 mainstream listed mining enterprises

At the same time, just a few days before the release of Tianqi Lithium Industry's results, the company's share price hit the "daily limit" one after another, a sign of the strong positive sentiment in the market.

The performance broke out in an all-round way, and the advantages are gradually being realized.

From a further disassembly point of view, the strong outbreak of Tianqi lithium industry in 2021 can be attributed to the overall rise of the three dimensions of "quantity, price and profit".

First of all, we must first understand the existing business structure and layout trend of the lithium industry in next day. At present, the company's business covers the key links of the lithium industry chain, integrating upstream resource reserve, development and mid-stream lithium product processing (as shown below), thus building obvious resources, scale and cost advantages. in particular, it is the only enterprise in China that is 100% self-sufficient in the field of lithium concentrate.

The Integrated Business Model of Tianqi Lithium Industry

Based on the comprehensive business model and finished product characteristics of Tianqi lithium industry, its business can be divided into two parts: lithium concentrate and lithium chemical industry. Among them, lithium chemical industry accounted for 65.5% of revenue in 2021.

2017-2021 company revenue by product (unit: millions of yuan)

Therefore, in terms of sub-products, the company's performance outbreak is mainly due to the simultaneous rise of "volume, price and profit" of the two major products.

In terms of production and sales, in 2021, Tianqi lithium industry produced a total of 43700 tons of lithium chemical products, an increase of 14.84 percent over the same period last year; sales volume of 47700 tons, an increase of 33.64 percent; production of lithium concentrate of 953900 tons, an increase of 64.49 percent over the same period last year; and sales of 551200 tons, an increase of 56.26 percent over the same period last year.

Looking at the price, the average sales price of the company's lithium products reached 105200 yuan / ton in 2021, up 113.74% from the same period last year, while the average sales price of lithium concentrate was 738 US dollars / ton, up 14.24% from the same period last year.

From the profit side, the gross profit per ton of lithium chemical sector in 2021 was 65000 yuan / ton, up 457.94% from the same period last year, with a gross profit margin of 61.89%, a sharp increase of 38.18% over the same period last year; lithium concentrate plate, gross profit per ton reached US $458.32 / ton, up 13.46% from the same period last year, although the gross profit margin decreased slightly by 0.43% to 62.1%, it is still relatively stable and ranks among the industry leading level.

Gross profit margin of composite and products rebounded significantly in 2021

It is precisely because of the "steady rise" of the gross profit margin of the core products, the comprehensive gross profit margin of Tianqi Lithium Industry has also increased to 61.97% in 2021. This level completely crushes the leading enterprises in other links of the industrial chain, including the power battery field in the middle reaches, which can be called the "golden track", which fully shows how important the occupation of the industrial chain is.

Taking into account both high-quality resources and production capacity, continue to resolve risks, is expected to meet the strategic reassessment

As we all know, there is a high positive correlation between the performance of core lithium resources companies such as Tianqi Lithium Industry, as well as the stock price and the cycle of lithium resource price increase. The sharp rise in lithium prices essentially reflects the extreme scarcity of lithium resources due to the epidemic, the outbreak of demand for new energy vehicles and other factors.

Of course, in addition to the field of electric vehicles, lithium is also used in consumer electronics, energy storage and traditional industries, especially in energy storage, which is regarded as the next trillion track in the industry.

Compared with the strong demand, the supply of lithium appears to be "stretched". First of all, the global lithium resources are distributed in ores and salt lakes (brine), of which the lithium resources in salt lakes account for more than 60%. Compared with the extraction of lithium from ores, the comprehensive cost of extracting lithium from salt lakes is lower, but the production cycle is long, usually one and a half to two years. In addition, lithium resources are mostly concentrated in South America, of which only "Bolivia, Chile and Argentina" accounted for 56% in 2021, while brine lithium resources accounted for 80% of the global share, so it is known as the "South American lithium triangle." comparatively speaking, China's resource endowment is not prominent, accounting for 5.7% and 12% respectively, so it mainly depends on imports.

Obviously, the voice of the industry lies in mining and processing, that is to say, resources and production capacity are king. Tianqi Lithium Industry's investment in these two key areas has always been obvious to all. In addition to firmly grasping domestic high-quality lithium resources, Tianqi Lithium Industry has also set its sights on top overseas lithium mining enterprises. Since 2013, it has significantly accelerated the pace of global expansion.

For example, in 2013, it acquired a 51% stake in Terlison, a company owned by Western Australia's Greenbushes (Greenbush Mine), the world's largest and best-quality spodumene mine, and acquired about 23.77% of SQM, a Chilean salt lake giant, in 2018, laying out Chile's Atacama Salt Lake, the world's best.

Among them, Greenbush lithium mine has great advantages in terms of resource reserves, ore grade, service life and cash production cost. Take the cash production cost as an example, even in the downward period of the industry, the cash cost of Greenbush lithium mine in 2020 is lower than the lowest average price of the market in the past five years, and the competitive advantage is very prominent.

Greenbush has both resource endowment and resource reserves.

The cash cost of Greenbush lithium mine is among the lowest in the world in 2020.

In addition, SQM is the world's top lithium salt lake resource in Tianqi lithium industry. SQM's Atacama Salt Lake is far ahead of others in terms of lithium reserves and grade, and its production capacity is among the highest in the world. Among them, the production capacity of lithium carbonate and lithium hydroxide in 2022 is planned to be 180000 tons / year and 30, 000 tons / year respectively, and the long-term planning will be expanded to 210000 tons / year lithium carbonate and 40 000 tons / year lithium hydroxide respectively.

SQM not only has outstanding resource endowment advantages, but also has good business performance, which brings good investment returns for Tianqi lithium industry.

According to forecasts released by Bloomberg, SQM's performance increased significantly in the first quarter of 2022, adding about 500 million yuan to Tianqi Lithium Industry's investment income. Considering the strong demand for lithium downstream, there will be a significant increase in SQM production capacity, production and price in the future, which also means that the investment return of the company can be expected in the future.

It is worth noting that Tianqi Lithium Industry has been nominated for the appointment of three board seats to SQM by holding about 23% of SQM, which also provides a favorable basis and expectation for the two sides to achieve coordination in the future.

Recently, Chile's copper-lithium nationalization bill has been blocked again, further reducing the risk of macroeconomic impact on SQM's assets.

After years of layout and promotion, Tianqi Lithium Industry now has a capacity of about 1.62 million tons of lithium concentrate and 44800 tons of lithium compounds and derivatives (as shown below), and is still in a gradual expansion and release cycle. Among them, the Terrison tailings Reservoir was completed and put into production in March this year, with an additional lithium concentrate capacity of 280000 tons per year.

It can be said that Tianqi lithium industry in the world, the left-handed top lithium resources, the right-hand processing plant layout, the achievement of the company's profound moat. Of course, Tianqi lithium industry has also paid a large price for this, especially due to the acquisition of SQM, the huge M & A loans, and the industry trough, resulting in continuous losses from 2019 to 2020, while many smelting capacity under construction is at a standstill due to capital and other problems.

However, this debt risk hanging from the top has been alleviated to some extent after the successful strategic investment of IGO in 2021, while Tianqi Lithium Industry is ushering in a new dawn when it resumes its Hong Kong stock listing plan. Data show that the total asset-liability ratio of Tianqi Lithium Industry shows a gradual downward trend after a marked decline in the second half of last year, and the net operating cash flow in the first quarter of 2022 increased nearly 10 times compared with the same period last year to 3.837 billion yuan.

The asset-liability ratio has declined significantly since the second half of the year.

Behind the return of performance in 2021, in addition to the strong cyclical force of the industry, Tianqi Lithium Industry itself has long been firmly committed to key areas and self-confidence in the long-term prosperity of the lithium industry. This kind of investment, which goes beyond the environment at that time and is based on long-term value, is obviously worth it in retrospect.

At this stage, asset prices in the financial market have been significantly revised back, and lithium prices have also fallen recently, how to view the future opportunities of the lithium industry chain at the moment?

Supply shortage is still the core contradiction, and it may be difficult to change this fundamental situation in the long run, which provides support for lithium prices. According to the Bohai Securities report, the total global lithium demand for 2021-2023 is 616000 tons of LCE, 778000 tons of LCE, 965000 tons of LCE,2021-2023 CAGR is 25.2%; accordingly, considering capacity utilization and lithium resource recovery, the total global lithium production from 2021 to 2023 is estimated to be about 462000 tons of LCE, 674000 tons of LCE, and 926000 tons of LCE.

Since the beginning of this year, affected by the epidemic and geographical conflicts, the global energy game has intensified: first, all countries are scrambling for traditional energy, and energy stocks have risen one after another; second, the switching of green energy has been accelerated. Tesla, Inc., BYD and other benchmark car companies respectively disclosed hydrogen energy timetables to bid farewell to the era of fuel vehicles. Electric vehicles and energy storage are recognized as the two main battlefields of new energy development are also moving forward, lithium as the core metal resource, its global supply chain change may also be just beginning. Under such a general trend, due to the long-standing rigid demand for lithium, although the total amount of resources is abundant, high-quality projects are scarce, so mastering high-quality lithium resources is essentially the pricing power of strategic metals, and it is only a matter of time before strategic revaluation is ushered in in the future.

Under such a general trend, the leading Tianqi lithium industry, which has been dormant for a long time, can be said to have no future and disadvantage. at present, the company's performance has ushered in a reversal and has once again won the market "flip". Considering the gradual release of the advantages of its resources and capacity layout, it is undoubtedly a very favorable choice to bet on the future.

The end.

Looking back, we may not be able to give an accurate guide to the future trend, but at least we can make clear where we are now.

Judging from the last two cycles of lithium prices (2015-2018 and 2021 to the present), the essential difference between this one and the previous one lies in the qualitative change of demand quality, that is, a stronger demand "intensity", which includes multiple influencing factors such as epidemic situation, geo-conflict and macro-economy.

The cycle of lithium price is highly related to the profit margin of mining enterprises. According to Baichuan Yingfu data, 2021Q1 lithium carbonate quarterly profit of 23600 yuan / ton, 2021Q4 increased to 94100 yuan / ton, and soared to 183900 yuan / ton again since the beginning of 2022.

While the profit trend in the industry continues to improve, the secondary market is "difficult to fall asleep", in which there are two obvious "deviations". Respectively, in January and September last year, the lithium mining plate fell, even the "lithium industry duo" is also difficult to compete with the general trend, have called back.

Of course, the operation of stock prices is affected by many factors, including market style, expectations, plate rotation and so on, which may fall in stages in the short term, but as far as the long-term trend is concerned, the anchor still lies in fundamentals. Under the background that the fundamentals of the industry have not changed, the sharp pullback of the leader undoubtedly gives a more attractive price.

Although lithium carbonate is in the historically absolutely high price area, the operating characteristic of commodity prices has always been "trend is king". There is no substantial change in the pattern of supply and demand, and the trend will continue.

In the short term, the progress of production expansion of upstream lithium suppliers is slow. In the medium term, with the gradual release of the early expansion capacity of major enterprises, the supply of lithium resources will grow rapidly by 2025. In the long run, the supply of lithium resources is limited, and with the end of the current cycle of capacity expansion, the supply increment after 2025 is very limited.

In addition, it is worth mentioning that the first round of this year's auction of Australian lithium mining company Pilbara closed at US $5650 a tonne on April 27th. The grade is still 5.5%, but it is much higher than the price of the previous three rounds of auction, and far higher than the current mainstream price (about US $3100 / tonne), up more than 1.4 times from the final auction price of US $2350 / tonne last October. This precisely shows that the lithium concentrate market is still in a tight state where supply exceeds demand. Not only that, it is understood that the current market mainstream lithium resources suppliers have coincidentally raised the price of 2022Q2 lithium concentrate. This will further lead to the high price of lithium salt.