Based on the radiator, actively expand the field of cathode materials for lithium batteries. The three traditional businesses of overclocking are radiator and LED lighting. In the face of the slowdown in the market growth of the original business, the company actively adjusted its development strategy and acquired a 49.5% stake in Gejiu Sheng Bihe Industrial Co., Ltd. in 2018 to realize the transformation to the field of lithium battery cathode materials. In 2022, Q1, the company's lithium battery cathode materials business accounted for 48.82% of revenue, far exceeding the traditional radiator and LED lighting business, lithium battery cathode materials business has gradually become the company's core strategic business. In 22 years, Q1 Company achieved a net profit of 26 million yuan, an increase of 1035.82% over the same period last year. In the future, with the company's focus in the positive field, profits are expected to achieve rapid growth.

The installed capacity of power batteries is rising rapidly, and decommissioned batteries are in urgent need of recycling. At present, carbon peak and carbon neutralization have become the consensus of the international community. with the support of national policies, the trend of new energy vehicles replacing traditional fuel vehicles is more obvious. with the rapid growth of the permeability of new energy vehicles, we expect that the global power battery will enter the TWh era in 2025. The decommissioned power battery is first used step by step and then recycled. Lithium iron phosphate has a longer cycle life and is more suitable for ladder utilization, and ternary is more suitable for direct disassembly and recycling.

The main body of multi-element battery recycling generally uses hydrometallurgy, and there is a broad market space for battery recycling. According to the different recycling subjects, it can be divided into four recycling modes: 1) new energy vehicle production enterprises as the main body; 2) power battery production enterprises as the main body; 3) third-party comprehensive utilization enterprises as the main body; 4) power battery industry alliance as the main body. Each of the four models has its own advantages, production enterprises have network advantages, recycling enterprises have professional advantages. The recycling of power battery is mainly divided into three processes: pretreatment process, separation and extraction process and product preparation process. Pyrometallurgy, hydrometallurgy and bio-metallurgy are the mainstream separation and extraction methods at present. The hydrometallurgy process has the advantages of low energy consumption and high recovery. It is a more effective method for the recovery of lithium-ion batteries, which is adopted by most enterprises. Assuming that the retirement life of ternary battery is 6 years, and that of lithium iron phosphate battery is 8 years (including two years of echelon utilization), we estimate that the recyclable capacity of lithium, cobalt, nickel and manganese will be 39500 tons, 37300 tons, 182400 tons and 44600 tons respectively in 2030. Decommissioned power batteries can produce 208500 tons of lithium carbonate, 178100 tons of cobalt sulfate, 793700 tons of nickel sulfate and 136900 tons of manganese sulfate.

Gejiu Sanbi and has the channel advantage, the complete recycling industry closed loop opens the profit space. The purification rates of Gejiu Sanbi and recycled nickel, cobalt, manganese, lithium and other raw materials are ahead of the national standards, and are expected to be included in the "whitelist" and further expand the recovery channels. At the same time, in terms of customers, we have a group of high-quality customers with stable orders and good payment terms in the lithium battery industry. Gejiu Sanbihe has technical advantages in the recycling of waste batteries, and has a complete industry chain of "comprehensive recycling of waste lithium-ion battery materials → precursor / lithium carbonate → cathode materials", which is more profitable than recycling enterprises and has more room for cost reduction than precursor and cathode materials enterprises.

Profit forecast and investment rating: we expect the company's revenue in 2022-2024 to be 11.2 yuan, 2.16 billion yuan and 3.01 billion yuan, an increase of 93%, 94% and 40% respectively. Considering that the company's lithium battery material recycling business will account for most of the revenue and profit in the future, and the business sector is still in a period of rapid expansion, we mainly choose Rongbai Technology, Dangsheng Technology and Tianqi shares of the lithium battery recycling business of the lithium battery industry as comparable companies. Comparable company's average price-to-earnings ratio in 2023 is 19X, the company's current market capitalization corresponds to 2023 PE is 18X, and the company's PE in 2023 is smaller than the company's average. Considering the rapid expansion of the company's lithium battery recycling business and high profit margin, the company is given a "buy" rating for the first time.

Risk factors: the company's capacity expansion is not as expected; fierce competition in the industry leads to sharp price fluctuations; policy risk; sharp fluctuations in upstream and downstream material prices.