Incident: The company released its 2022 semi-annual report. The company achieved revenue of 997 million yuan in 2022, an increase of 194.44% over the previous year; achieved net profit of 576 million yuan to the mother, an increase of 4444% over the previous year; and basic earnings per share of 2.22 yuan/share. Among them, Q2 2022 achieved operating income of 509 million yuan, an increase of 124.79% over the previous year; net profit of the mother was 322 million yuan, an increase of 2861% over the previous year.
The gross profit of the concentrate business increased, and the gross profit of the lithium salt business increased significantly. In terms of revenue, the revenue of H1 lithium salt, battery equipment manufacturing, and lithium concentrate in 2022 was 621 million yuan, 188 million yuan, and 174 million yuan respectively, with year-on-year changes of +258.6%, 56.1%, and 328.5%, accounting for 63%, 19.1%, and 17.7% of total operating revenue in that order. In terms of cost, the operating costs of H1 lithium salt, battery equipment manufacturing, and lithium concentrate in 2022 were 501 million yuan, 130 million yuan, and 28 million yuan respectively, with year-on-year changes of +216.1%, 43.8%, and 109.8% in that order, accounting for 75.8%, 19.6%, and 4.3% of total operating costs. In terms of gross profit, the gross profit of H1 lithium salt, battery equipment manufacturing, and lithium concentrate in 2022 was 120 million yuan, 59 million yuan, and 146 million yuan respectively, accounting for 36.8%, 18%, and 44.9% of gross profit in that order, and gross margin was 19.3%, 31.1%, and 83.8% in that order.
The pace of release in the lithium ore mining business is impressive, and revenue and gross profit per ton have increased markedly. (1) Amount:
In 2022, H1 produced and sold 23,700 tons of lithium concentrate and 23,000 tons (6% off 18,900 tons) in that order. The company's lithium ore mining business completed a total of 421,400 tons of extraction, of which 291,100 tons of rock were stripped and 133,300 tons of raw ore were extracted; the refining plant processed a total of 129,400 tons of raw ore and produced 23,700 tons of lithium concentrate. (2) Price: In 2022, H1 lithium concentrate achieved sales of 290 million yuan. After offsetting unrealized internal transaction profits with associated companies, lithium concentrate revenue was 174 million yuan, with an average price of 12,600 yuan/ton (15,300 yuan/ton, discount SC6). The average price of H1 SMM lithium concentrate in 2022 was 23,000 yuan/ton, or there is a certain discount with the market price. (3) The cost and gross profit of H1 per ton in 2022 is about 2,041 yuan/ton, 10,067 yuan/ton. (4) The winter break period is over, and the pace of lithium ore release is impressive: according to the announcement, the current production capacity of methyl carbide concentrate is about 70,000 to 80,000 tons. Q1 in 2022 produced 0.42 million tons of lithium concentrate, and Q2 produced 19,500 tons. Production is expected to continue to increase in the second half of the year. (5) Rongda Lithium Tailings Depot Safety License Update: In June 2022, Rongda Lithium obtained the Kangding Methylcarb Spodumene Mine Tailings Storage “Safety License” issued by the Sichuan Provincial Emergency Management Department. The validity period is from June 6, 2022 to June 5, 2025.
The volume and price of the lithium salt business have increased sharply, contributing part of the profit. (1) Volume: The company holds 80% of the shares of Changhe Huali. Its production capacity of battery-grade lithium carbonate and lithium hydroxide was 3000/1800 tons in that order. H1 produced and processed about 1,515 tons of battery-grade lithium salt in 2022, and sold 2006 tons (including 250 tons for trade). (2) Price: The revenue per ton of H1 lithium salt in 2022, the cost per ton, and gross profit per ton were 31, 250, and 60,000 yuan/ton in that order.
Chengdu Rongjie was successfully put into operation, and the inventory was profitable or reversed. According to the announcement, the Chengdu Rongjie Phase I 20,000 ton/year lithium salt project passed all the inspections in June 2022 and entered the formal production stage in July. In 2022, Chengdu Rongjie produced 6,669 tons of battery-grade lithium salt and sold 4190 tons. Revenue per ton and net profit per ton were 340,000 yuan/ton and 217,000 yuan/ton in that order, achieving revenue of 1,420 million yuan and net profit of 908 million yuan. In addition, judging from production and sales, due to the impact of the epidemic, there was a phased adjustment in Q2 lithium prices, and the company adjusted its business strategy in a timely manner. According to the announcement, Chengdu Rongjie currently stocks about 2,479 tons. Combined with the increase in production in the second half of the year, it is expected to contribute considerable investment income throughout the year.
Investment advice: We expect the company to achieve operating income of 3,351, 43.52 and 5.716 billion yuan respectively in 2022-2024, and net profit of 1,825, 24, and 3.413 billion yuan. The corresponding EPS will be 703, 9.24, and 13.14 yuan/share respectively. The current stock price corresponding to PE is 18.2, 13.8, and 9.7 times.
Maintain the “Buy-A” rating and target price of 145 yuan/share for 6 months.
Risk warning: demand falls short of expectations, lithium prices fluctuate greatly, project progress falls short of expectations