Tianqi shares on the basis of intelligent equipment business, around the automotive industry chain, the layout of lithium battery cycle, recycling equipment and other business. In the lithium battery recycling industry, the subsidiary Jintai Pavilion is the leader in the third-party recycling enterprises. benefiting from the increase in the scrapped scale of power batteries and the shortage of lithium metal, the company's profitability has been greatly improved. at the same time, actively expand the production of ternary and iron lithium recovery capacity, is expected to maintain a leading position. In addition, the company increases the fine management, focuses on the main business, and the management ability continues to improve. For the first time, coverage gives a "buy" rating.

Deep ploughing automobile industry chain, profit recovery. Founded in 1984, the company has formed four business sectors: intelligent equipment, lithium battery cycle, cycle equipment and heavy industry machinery around the "automobile life cycle", in which lithium battery cycle business is an important source of profit. In 2021, the company has a revenue of 3.78 billion yuan (+ 5%YoY) and a net profit of 151 million yuan (+ 147%YoY). 2022Q1's revenue was 940 million yuan, + 30% year-on-year, and its net profit was 89 million yuan, + 121% compared with the same period last year.

Increase the recycling of ternary and iron lithium batteries and contribute to the main source of profit. With the arrival of the peak of power battery decommissioning, the superimposed rise in lithium prices has greatly improved the profitability of the company's lithium battery recycling business: in 2021, the revenue of lithium battery recycling business is 900 million yuan (+ 210%YoY), and the gross profit margin is 35.7% (+ 13.2pcts). Jintai Pavilion, a subsidiary, has accumulated profound and accelerated production expansion: the company estimates that the overall production capacity of the lithium battery cycle plate in 2022 will be 9000 gold tons of cobalt manganese nickel and 4000 tons of lithium carbonate, and 12000 gold tons of cobalt manganese nickel and 5000 tons of lithium carbonate in 2023. In addition, the company plans to dispose of 150000 tons of waste lithium iron phosphate batteries per year, of which the first phase of the project (with a treatment scale of 50,000 tons) will be launched in the second quarter of 2022. The main products are lithium carbonate and iron phosphate.

Intelligent equipment around the transport equipment and production lines, has won a number of electric car company orders. The company signed orders of 1.63 billion yuan in 2021, of which new energy vehicle projects accounted for 67%, including orders from well-known automobile brands such as Beamlight, Volkswagen, BYD, ideal, Tesla, Inc. and so on. With the expansion of global new energy vehicle capacity, the company will focus on the new energy vehicle market, increase technological innovation, open up overseas markets, and enhance the added value of business, which is expected to benefit from the development of the industry.

Circular equipment business with the help of the "double carbon goal" to promote business upgrading. Recycling equipment business includes automobile recycling and crushing equipment and scrapped automobile recycling business. Hubei Lidi Machine tool, a subsidiary of Hubei Lidi Machine tool, specializes in the field of cycle equipment. In 2021, it completed the development of 9 new products, such as RGV cycle trolley scrap car disassembly line, power battery multi-dimensional lifting vehicle, permanent magnet servo tearing machine, 22 new patents and 1 software copyright. Subsidiary Ningbo Recycling and O'Reid are mainly engaged in scrapped car recycling and disassembly and other business. in the future, Ningbo Recycling will join the new energy vehicle disassembly equipment through technical transformation, and develop in coordination with the company's lithium battery recycling industry. In 2021, the company realized 450 million yuan in sales revenue and 532 million yuan in newly signed orders.

Heavy industry machinery business continues to fine management, reduce cost and increase efficiency. Subsidiary Tianqi heavy Industries has the ability to produce and process the world's largest 75-ton 12MW offshore wind power wheels. In 2021, the company's heavy industry machinery business newly signed 870 million yuan, resulting in a sharp decline in profitability due to the sharp rise in the prices of pig iron, scrap and resin, the main raw materials. It is expected that in the future, the company will continue to carry out internal fine management, optimize the process level, reduce the consumption of various production links, and stabilize the gross profit level by raising the sales price and locking the purchase price, so as to maximize the benefit.

Risk factors: the risk that the development of new energy vehicles is not as expected, the risk of fluctuation of raw material prices, the risk of intensified competition in the industry.

Investment suggestion: Tianqi shares in the company on the basis of intelligent equipment business, around the automotive industry chain, the layout of lithium battery cycle, recycling equipment and other business. In the lithium battery recycling industry, the subsidiary Jintai Pavilion is the leader in the third-party recycling enterprises. benefiting from the increase in the scrapped scale of power batteries and the shortage of lithium metal, the company's profitability has been greatly improved. at the same time, actively expand the production of ternary and iron lithium recovery capacity, is expected to maintain a leading position. In addition, the company increases the fine management, focuses on the main business, and the management ability continues to improve. Comparable companies (Hausen, Huahong Technology, Gremmei, Huayou Cobalt) unanimously forecast an average PE of 14x in 2023. We estimate that the company's annual net profit in 2022-23-24 will be 3.3 million yuan, respectively, and the compound growth rate of net profit in 2022-24 will be 40%. Considering the high growth of the company, it can be given 25x PE in 2023, corresponding to a target market value of 13.2 billion and a target price of 35 yuan, covering for the first time. Give a "buy" rating.