Main points of investment
Event: the company announced a pre-increase in performance and is expected to achieve a net profit of RMB 0.55-75 million in the first half of the year, an increase of 168.51% RMB266.15% over the same period last year, and an increase of RMB 0.67-87 million after deduction.
Deducting the non-post-performance greatly exceeded the market expectations, the growth mainly came from the investment income of Tiancheng lithium industry. According to the company's announcement, the net profit of returning to the mother in the first half of the year is expected to be 0.55-75 million yuan, an increase of 0.35-55 million yuan over the same period last year, an increase of 168.51% RMB266.15% over the same period last year, and an increase of 0.67-87 million yuan after deduction (- 20 million yuan for the same period last year). The growth mainly comes from: 1) the exchange gains have increased significantly due to the depreciation of the RMB against the US dollar. 2) take a stake in 33.33% of Tiancheng Lithium Industry, with a corresponding investment income of 31 million yuan (Tiancheng Lithium Industry's first-half net profit was 95 million yuan). (3) the income from the sale of idle land and factories decreased by about $40 million in the first half of this year compared with the same period last year.
Cut into lithium salt: buy Tiancheng lithium industry layout mica to extract lithium, resource endowment + supply exceeds demand to ensure high gross profit. 1) layout: in 2021, the company entered into the areas of lithium carbonate and lithium hydroxide business through the acquisition of 33.33% stake in Tiancheng Lithium Industry (a framework agreement signed in March 2022 to further increase the shareholding ratio to 51%). 2) Endowment: in terms of resources, Tiancheng Lithium Industry ploughs the lithium capital of Yichun, Jiangxi Province, and ensures the effective supply of raw materials. It is the largest supplier of Jinhui Lithium Industry, one of the five major mica lithium extraction enterprises in Yichun. In terms of production capacity, after the construction of the second phase of the production line is completed (July 2022), the capacity of lithium sulfate solution will be increased from 3000 tons / year to 5712 tons / year. 3) Prospect: in terms of price, China will still maintain a tight balance of lithium carbonate in 2022, the gap between supply and demand will expand in 2023, the profitability of the industry will be further improved, and the price of lithium sulfate solution is expected to remain high. In terms of performance, according to the company's reply to the inquiry letter of the Shanghai Stock Exchange, it is estimated that from 2022 to 2026, the income of Tiancheng lithium industry will be 5.09,6.41,6.41,6.41 and 641 million yuan respectively, and the net profit will be 0.98,1.27,1.26,1.26 and 126 million yuan respectively.
Acquisition of lithium ore: hold a stake in the Marie spodumene project, open up the upper-middle reaches, and open up the growth space. 1) Industry: benefiting from the development of the lithium industry, the lithium industry has entered a period of rapid growth, and lithium has grown from "small metal" to "big metal". Upstream and downstream enterprises production and marketing binding + industrial vertical integration has become a trend. 2) Resources: in June 2022, the company and its wholly-owned subsidiaries acquired a 100% stake in Taian Xinchang and held a 7.23% stake in the Bougouni spodumene project in Mali after the acquisition, and indirectly had the right to underwrite not less than 80% of the lithium concentrate products of the mine for three consecutive years. Benefiting from the sharp increase in demand for lithium batteries, the average price of lithium mines rose 43 per cent, and the project IRR rose from 50.9 per cent to 91.2 per cent based on an annual output of 238000 tons. 3) extension: after the completion of the acquisition, the company has opened up all the links from upstream lithium mining to mid-stream lithium salt processing: on the one hand, it is imported from abroad through spodumene ore, and the overall planning target for lithium concentrate is 238,000 tons / year and 100,000 tons / year. It is expected to be put into production in the second quarter of 2023. On the other hand, through the procurement of local lithium mica + self-built concentrator, it is conservatively estimated according to the sales volume of lithium sulfate solution of Tiancheng lithium industry of 5712 tons / year, and the corresponding net profit is 571 million yuan / year.
Profit forecast and investment rating: we maintain the company's estimated EPS of 1.48,3.44,5.35 yuan in 22-24, respectively, corresponding to PE of 34,15,10 times, maintaining a "buy" rating.
Risk hints: slow production of Vietnam base, less-than-expected lithium mining, large fluctuations in lithium salt prices, etc.