Incident: The company disclosed its 2022 semi-annual results forecast.
2022H1, the company's net profit is expected to be 86-95 million yuan, an increase of 279%-319% over the previous year; net profit after deducting the return of the mother is expected to be 8538-94.38 million yuan, an increase of 284%-325% over the previous year.
Looking at the results for the second quarter alone, net profit for Q2 is expected to be 4530-543 million yuan, an increase of 11%-33% over the previous year, and an increase of 246%-315% over the previous year; net profit after deducting non-return mother's net profit is expected to be 4478-53.78 million yuan, an increase of 10%-32% over the previous year, an increase of 243%-311% over the previous year.
The performance of the first half of the year slightly exceeded expectations and was implemented smoothly; the second half of the year welcomed the release of new production capacity and relays sprinted. Judging from the pace of the company's production capacity investment this year, it was mainly concentrated in the third and fourth quarters, with no new production capacity added in the second quarter. In the first half of the year, the company had an annual production capacity of 10,000 tons of lithium iron phosphate cathodes and an annual production capacity of 7,000 tons in three yuan. Net profit returned to the mother in the second quarter increased 11%-33% month-on-month, in line with expectations, and performance was implemented smoothly. The company's iron lithium production capacity under construction includes 40,000 tons for the Zaozhuang base, 25,000 tons for the first phase of the Anqing base, and 25,000 tons for the first phase of the Yunnan Yuxi base. Zaozhuang and Anqing Phase I are expected to start production in Q3, and Yuxi Phase I is expected to start production in Q4. By the end of this year, the lithium iron cathode production capacity will reach 100,000 tons. In terms of three yuan, production capacity of 8,000 tons of high nickel will also be put into operation in the second half of the year. The total production capacity of three yuan is expected to reach 15,000 tons by the end of this year. I am optimistic about the incremental space brought about by the release of new production capacity in the second half of the year.
Leading high quality battery customers such as BYD and Penghui, iron-lithium racetrack power+energy storage two-wheel drive. The company's main customer for lithium iron phosphate cathodes is BYD. In the first half of this year, BYD sold more than 640,000 new energy vehicles, an increase of more than 300% over the previous year. Since March, monthly sales have continued to reach new highs, and on-hand orders are full. Penghui Energy is currently another major customer of Fengyuan. Currently, the two sides have signed 800 million contract orders over 2.2 years and are cooperating closely. Furthermore, the company passed the Ningde Era Supplier Certification in early '22, and the circle of friends has been further expanded. We look forward to further upgrading the customer structure after the new production capacity is put into operation.
The lithium and phosphorus resource terminals were gradually equipped, and a pilot line for lithium extraction from clay was completed by the end of the year. The company previously signed an “Investment Agreement” with the People's Government of Hongta District, Yuxi City, Yunnan, to invest 200,000 tons of lithium battery cathode materials in Hongta, Yuxi. The project is divided into three phases. The first phase initially invests 1 billion yuan to build an annual output of 50,000 tons of lithium iron phosphate cathodes and 1,000 tons of clay lithium extraction pilot line. After the pilot line is verified, it will support the construction of 50,000 tons/year lithium salt production capacity and 200,000 tons/year iron phosphate production capacity.
Profit forecast and valuation: We expect the company to achieve net profit of 2.60/487/729 million in 2022-2024 respectively, up 389.1%/87.6%/49.6% respectively over the previous year. The corresponding PE was 42.6/22.7/15.2 times respectively, maintaining the “buy” rating.
Risk warning: downstream demand falls short of expectations; capacity construction progress falls short of expectations; risk of fluctuations in raw material prices; increased risk of market competition