Main points of investment

In China's leading cobalt salt enterprises, the production capacity of cobalt has expanded from 12500 tons to 30,000 tons, and that of copper from 30,000 tons to 40,000 tons. Tengyuan Cobalt Industry is mainly engaged in the research and development, production and sales of cobalt and copper products, and is one of the leading cobalt salt manufacturers in China. In 2021, the company has a production capacity of 32400 tons of copper and 12500 tons of cobalt products, including 6000 tons in Congo and 6500 tons in China. It is estimated that by the end of 2022, the company will have a production capacity of 40,000 tons of copper and 30,000 tons of cobalt, including 10,000 tons in Congo and 20,000 tons in China.

The cost advantage of cobalt is obvious, and the smelting technology constructs the core competitiveness. In 2021, the gross profit margin of the company's cobalt business is 43.22%, and that of copper products is 42.08%. Compared with other enterprises in the industry, the gross profit margin of the company's main products are in the forefront of the industry. With the decline of the taste of Congo gold, copper and cobalt ore, the company's independently developed smelting technology can deal with low-grade tailings and slag, greatly increasing metal recovery, reducing production costs and building the company's moat.

Layout integration, to create raw materials-precursors-recycling industry chain closed loop. In March 2022, the company raised 2.19 billion yuan to build a project to produce 10,000 tons of cobalt and 10,000 tons of nickel from cobalt intermediates, nickel intermediates and lithium battery waste, including electrodeposition of cobalt, lithium carbonate, ternary precursors and so on. The company is also increasing the recycling of battery materials and the research and development of precursors, which account for 90% of the cost of nickel, cobalt and lithium. With reference to the gross profit margin of enterprises with integrated industrial chains, such as Huayou and Green Mei, Tengyuan's layout of integrated profitability is expected.

Short-term downstream consumption is somewhat disturbed, and long-term power battery-driven cobalt is in short supply. Supply:

The global cobalt ore increment is mainly concentrated in Glencore Mutanda, Huayou Indonesia Nickel and Cobalt Project, Luomo TFM/KFM and so on. Demand: short-term consumer electronics malaise, cobalt prices under pressure, long-term power batteries drive cobalt demand growth. It is estimated that there will be a global cobalt shortage of 0.02 million tons in 2023-2025. The current cobalt price has basically fallen to the bottom range and is expected to rise later.

Profit forecast and valuation

It is estimated that the net profit of 2022Universe 2023Universe in 2024 will be 15.88Accordance 25.53According to 3.637 billion Yuan, the corresponding EPS is 700Universe 11.26Universe 16.04, and the corresponding PE is 13.3 Placement 8.3A 5.8 times. With reference to the valuation level of domestic counterparts, it is given a valuation of 15 times, corresponding to a six-month price of 169 yuan per share.

Cover for the first time and give a "recommended" rating.

Risk hint

The expansion of the company's fund-raising projects fell short of expectations, the price of copper and cobalt fell faster than expected, and downstream consumption was lower than expected.