Event
The company issued a performance forecast for the mid-year report on July 13, 2022. In the first half of 2022, the company is expected to achieve a net profit of 530 million yuan to 630 million yuan, an increase of 4080.57% RMB4869.36% over the same period last year, and an EPS of 2.04 yuan to 2.43 yuan.
Comment
The volume and price of Q2 company's concentrate and lithium salt products have risen. The net profit of Q2 company is expected to be 276 million yuan to 376 million yuan, an increase of 9% over the previous month. The average price of Q2 lithium carbonate was 4712,000 yuan / ton, with a ring increase of 12%; the average price of lithium hydroxide was 4727000 yuan / ton, with a ring increase of 25%. Chengdu Rongjie Lithium Industry, which is 40% owned by the company, expects Q2 trial production to increase month-on-month, benefiting from rising lithium prices, and its contribution to investment income has increased significantly. Rongda Lithium, a wholly-owned subsidiary, resumes production after the winter break of the methyl card mine, and is expected to sell about 70,000 tons of concentrate for the whole year, giving priority to Chengdu Rongjie Lithium production.
The annual mineral processing capacity of 2.5 million tons / year of Yuanyangba still needs to be approved by the upper planning and environmental assessment. Rongda Lithium Industry, a wholly-owned subsidiary, has the mining right of Methyl Card No.134 vein, and currently has an annual production capacity of 450000 tons and 70,000-80,000 tons of lithium concentrate. Kangding Rongjie Lithium Industry, a wholly-owned subsidiary, plans to expand its mineral processing capacity of 2.5 million tons / year in Yuanyangba, with about 470000 tons of lithium concentrate, giving priority to matching the mining capacity of 1.05 million tons / year and about 190,000 tons / year of concentrate. Later, it may continue to expand mining capacity to 2.5 million tons / year, or coordinate the purchase of raw ore from the government. The construction cycle of the project is one year. At present, it is waiting for the approval of the superior planning EIA to be formally declared to the Ganzi Prefecture Ecological Environment Bureau. Under smooth circumstances, the EIA of the project will be approved within one month, and we will strive to start the main project construction within this year.
Chengdu Rongjie Lithium Industry was officially put into production and signed a supply agreement with BYD. In June, 22, Chengdu Rongjie Lithium Industry Phase I lithium salt project has passed planning acceptance, fire control acceptance, safety assessment acceptance, environmental assessment acceptance, energy assessment acceptance and other acceptance work, and obtained the "Safety production license". Chengdu Rongjie Lithium Industry finished trial production in June and entered the formal production phase in July, then signed a lithium carbonate supply agreement with BYD for delivery from June to December 22 years, with monthly settlement according to the market price. According to BYD's announcement, the volume of transactions related to Chengdu Rongjie Lithium Industry in 22 years is expected to be 1.5 billion yuan.
Profit Forecast & Investment suggestion
It is estimated that the net profit of the company from 22 to 24 is 2.007 billion yuan, 3.012 billion yuan and 3.489 billion yuan respectively, the EPS is 7.73,11.60,13.44 yuan respectively, and the PE is 16 times, 11 times and 9 times respectively. Maintain a "buy" rating.
Risk hint
Downstream demand is lower than expected; lithium mine external environmental risk; production expansion progress is not as expected.