Investment Summary:
PCB chemical leader, actively layout lithium battery recovery and recycling business. Since its inception, the company has experienced two stages of development: from its inception to 2015, the company has ploughed into the field of professional chemicals and gradually grown into a domestic leader in PCB chemicals; from 2015 to now, the company has actively distributed lithium battery cathode materials and recycling business. With the wave of retirement approaching, this part of the business is expected to become the second growth pole, reshaping the company's main structure.
The market space of iron and lithium recycling is broad, and technology and channels become the key elements. The wave of power battery decommissioning is approaching, with CAGR of more than 40% in 2022-2026. Bus decommissioned batteries and production wastes are the main sources for the recovery of lithium iron phosphate batteries in the initial stage. At present, the battery recycling channel and pricing mechanism are not perfect, and the construction of a stable recycling channel is the key to the development of battery recycling business; at the same time, the recovery process of lithium iron phosphate battery is still under development and optimization, and the gross profit margin of lithium iron phosphate recovery is significantly affected by the product price, while the gross profit of lithium carbonate / iron phosphate recovery is less affected by the product price.
The layout focuses on iron lithium in advance, and the production capacity enters the release period. The company is the first batch of whitelist enterprises of the Ministry of Industry and Information Technology, covering the whole process from cascade utilization to recycling. At present, it has a production capacity of 26000 tons of cathode materials. In addition, 10, 000 tons of lithium iron phosphate recovery capacity is expected to be put into production in the second half of 22, and another 100000 tons of lithium iron phosphate recovery capacity is under construction and is expected to be put into production between 2023 and 2024.
Through the iron lithium recovery and regeneration of the whole chain, the layout of technology industrialization is relatively fast. Relying on the advantages of its own technology accumulation, the company independently develops the full chain technology for the production of lithium iron phosphate cathode materials and the recovery of recycled cathode materials from waste lithium iron phosphate batteries. The product has a good low-temperature performance, and the production process is green and environmentally friendly, has received market certification and approval, technology industrialization has been completed, and has entered the stage of capacity scale release, which has a certain first-mover advantage.
Targeted layout of recycling channels, Huaneng service to deepen the binding. The company mainly aims at bus manufacturers to build recycling channels. Since 2018, the company has signed cooperation framework agreements with bus manufacturers such as BAIC, Nanjing Jinlong and Fujian Ouhui. Based on the advantages of self-developed battery performance service technology, the company deepens the binding with power exchange enterprises, battery enterprises and commercial vehicle enterprises, making the source of decommissioned power batteries further consolidated. The company's first Huaneng service station was completed in Beijing in 2021.
Domestic instead of superimposed 5G layout, control cost, increase profit and steadily increase chemical business. The company's PCB chemicals and chemicals business has benefited from the steady growth of domestic alternatives, and has cut into the 5G track to establish close cooperation with ZTE Corporation and other companies. At the same time, through raw material cost control and product structure optimization, digest the cost pressure and improve the profit level.
Investment suggestion: we predict that the company's operating income from 2022 to 2024 will be 5 billion yuan, 5.9 billion yuan and 7.09 billion yuan, and the net profit will be 230 million yuan, 495 million yuan and 620 million yuan. The corresponding EPS is 0.59, 1.26, 1.57 yuan. Give the company a valuation of 40 times PE in 2022, with a corresponding share price of 23.6 yuan and a market capitalization of 9.27 billion yuan. Cover the company for the first time, giving a "buy" rating.
Risk hints: capacity expansion and release are not as expected, prices of lithium iron phosphate raw materials fluctuate sharply, and competition in the battery recycling market intensifies.