Event: the company released a semi-annual report on 2022. During the reporting period, the company achieved operating income of 987 million yuan, year-on-year + 194%, and return to the mother net profit of 576 million yuan, + 4444% compared with the same period last year. Among them, the second quarter operating income was 509 million yuan, month-on-month + 6.5%, return-to-mother net profit was 322 million yuan, month-on-month + 26.8%.

The production capacity of the methyl card mine was released smoothly, and 22H1 realized the production and marketing of lithium concentrate 23730t. The methyl card mining area of the company resumed production at the end of the winter break on March 8, the earliest year of the end of the winter break in history. The number of days of effective production in the mine for the whole year will be increased compared with last year, and 22H1 has achieved 2.37 / 23000 tons of lithium concentrate production and sales (reduced 6% grade 19589 million tons) Among them, Q2 achieved lithium concentrate production and sales of 19.5 million tons, with an output of + 369% compared with the previous month, indicating that the production capacity of the methyl card mine climbed smoothly. Based on the increase in the number of effective production days for the whole year, the mine's annual production target is expected to be successfully achieved.

The price of Q3 lithium salt has risen, and the profit in the second half of the year will concentrate on releasing Chengdu Rongjie's first phase of 20,000 tons / year lithium salt project to obtain a "safety production license" in June and enter the formal production stage in July. 22H1 Chengdu Rongjie achieved lithium salt production and sales of 0.67 million tons, of which Q2 achieved lithium salt production and sales of 0.36 million tons, with an output of + 15% compared with the previous month. Considering the short-term decline in lithium prices in May, the company is reluctant to sell. After the disturbance of the epidemic subsided in June, the sales data of new energy vehicles recovered rapidly, and the second half of the year was the peak season of traditional sales. The output ratio of all links of the industrial chain increased upward in August, and the demand side remained high. However, there was almost no rapid release of lithium resources in the short term, and the supply and demand determined that the lithium price continued to exceed expectations. Lithium prices have resumed the upward trend in the third quarter and may rise further in the second half of the year. Chengdu Rongjie 22H2 will usher in a good situation of rising volume and price, and its performance will be released centrally.

Yuanyangba 2.5 million tons cleaning project is under way, the long-term lithium concentrate production capacity may reach 470,000 tons / year, the existing annual mining capacity of 1.05 million tons + 450000 tons of mineral processing capacity, concentrate production capacity of about 70-80,000 tons; Yuanyangba 2.5 million tons mineral processing project is actively under progress, waiting for the upper planning Kang-Yan industrial concentration area environmental assessment landing, can be declared into the process, the project is expected to be put into production in 23Q2, corresponding to lithium concentrate can be expanded to 190,000 tons / year Taking into account the future government coordination of raw mines or companies are expected to apply for mining capacity expansion to match mining capacity, 2.5 million tons of mining capacity corresponding to lithium concentrate capacity may reach 470000 tons, equivalent to more than 10,000 tons of LCE6.

Investment suggestion: the company has superior lithium resource endowment, orderly expansion of lithium smelting capacity for integrated lithium mining and separation, and high performance release of tight supply and demand lithium prices, maintaining annual return net profit of 20.37 yuan per annum in 22-23-24, respectively, corresponding to the current market capitalization PE of 16-11-8, and maintaining a "buy" rating.

Risk hints: political policy risks; capacity expansion and product development are not as expected; the development of new energy vehicles is not as expected; disruptive breakthroughs have occurred in related technologies; and product prices have fallen more than expected.