Strategic path: Guben, Peiyuan, follow the trend, lead cobalt powder and start again
The company is one of the few leaders in the cobalt industry with a full industrial chain layout. After years of layout, it has formed the entire industrial chain from Congolese gold resources and crude refining to domestic refining and processing, and deep processing of cobalt powder, as well as the three major production capacity bases of Congolese gold, Anhui, and Ganzhou. The company lays out new energy based on copper and cobalt business. At present, the company has developed a production capacity of 10,000 tons of crude cobalt hydroxide, 41,000 tons of electrolytic copper, 5,000 tons of cobalt powder, and 3,000 tons of cobalt carbonate. The Ganzhou Hanrui 10,000 tons of new cobalt materials and the first phase of the 26,000 ton ternary conductor project of the 10,000 ton cobalt new materials project were completed and put into operation at the end of June. (1) Guyuan: The company is deeply involved in Congolese gold and ensures stable supply of raw materials through multiple channels through bulk procurement of mine leasing machines; at the same time, production capacity for crude intermediates and electrolytic copper smelting continues to expand, saving transportation costs and improving comprehensive utilization efficiency. (2) Peiyuan: The company is the world leader in cobalt powder. It has a cobalt powder production base in Chuzhou, Anhui. Currently, it has a production capacity of 5,000 tons of cobalt powder and a production capacity of 3,000 tons of cobalt carbonate. Of these, the expanded production capacity of 2,000 tons of cobalt powder was put into operation in the first half of 2022, further consolidating its leading position. (3) Following the trend: Following the trend of new energy, the company is entering into the expansion of lithium battery materials. The second phase of the plan is to start production of 26,000 tons of ternary yuan drivers in 2023. At the same time, the company joined hands with the upstream and downstream of the industrial chain to set up two major industrial funds to gradually create a “resource+battery+vehicle” industrial chain cooperation model.
Industry judgment: cobalt prices are still resilient, demand recovery can be expected
Looking back at the cobalt industry since 2020, the core price conflict in the domestic market has gone through the three stages of “supply - cost - demand” (supply: 2020-2021Q3, cost: 202Q4-2022.3, demand: 2022.3 to date). The domestic cobalt market began to clearly diverge from overseas trends in March. The dominant factor changed from rising costs, which were highly related to overseas prices, to a conflict where domestic demand weakened. Cobalt salt preceded the recovery of the metal cobalt. The global cobalt market gradually changed from overseas leading the country to following domestic trends overseas. Looking ahead to the future market, considering the continuation of the tight balance between supply and demand fundamentals and the current demand-dominated core conflict, we believe that the point where cobalt prices fall in the later stages will depend more on how prices are supported by a recovery in demand, focusing on tracking the extent of recovery in new energy vehicles and consumer electronics after entering the peak season in the second half of the year, as well as demand for high-temperature alloys and hard alloys that may exceed expectations. In terms of prices, a downward inflection point has already been reached. Considering the recent pullback in the prices of some cobalt products that have been in the peak season since 2021, the average price of cobalt metal reached 520,000 per ton in January-May 2022, the annual cobalt price center is likely higher than last year, and is expected to be 40-450,000/ton.
Landing investment: “cobalt +” new energy is taking off again
I am optimistic about the soundness of the company's performance and the revaluation of value under the new energy transition. The company's core recommendation logic is twofold: (1) As production capacity was put into operation and volume, the company's copper-cobalt volume increased significantly: Congo Gold's 6,000 tons of electrolytic copper, 5,000 tons of crude cobalt, Anhui Hanrui 2000 tons of cobalt powder, and the first 10,000 ton cobalt materials project in Ganzhou were launched one after another from the end of last year to the first half of this year, with a strong year-on-year increase in copper-cobalt volume throughout the year. Against the backdrop of a strong cobalt price center throughout the year, performance is expected to grow steadily. (2) The company is determined to transform new energy and is gradually building a “resource+battery+vehicle” industry chain cooperation model, with complementary advantages and a win-win situation. The implementation of specific projects later brings growth and valuation repairs are worth looking forward to. It is estimated that in 2022-2024, the company's net profit to the parent will be 1,215, 1,239 million yuan, and 1,346 billion yuan respectively. Corresponding to PE15.91X, 15.59X, and 14.36X, it is recommended to focus on its allocation value.
Risk warning
1. The progress of the company's project commissioning fell short of expectations;
2. Metal prices fell more than expected.