Incident: The company released its 2022 semi-annual report. H1's revenue in 2022 was 1,221 million yuan, +439.2% year on year; Guimu's net profit was 475 million yuan, +1018.3% year on year. Among them, in Q2 2022, the company's revenue was 868 million yuan, +861.4% year on year, +146% month on month; Guimu's net profit was 343 million yuan, +1430.4% year on year, +160.1% month on month.
The gross profit margin of lithium products has increased dramatically, and the cost of chromium products has dropped considerably. In terms of revenue, the revenue of H1 lithium products and chrome products in 2022 was 1,060 million yuan and 155 million yuan respectively, increasing by 961.6% and 25.2% year-on-year, accounting for 86.8% and 12.7% of revenue respectively. In terms of operating costs, the operating costs of H1 lithium products and chromium products in 2022 were 0.59 and 43 million yuan respectively, which decreased by 0.1% and 52% year-on-year, accounting for 56.6% and 41.9% of total operating costs respectively. According to the announcement, the sharp reduction in operating costs of chromium products was mainly due to a sharp increase in chrome ore production. In terms of gross profit, the gross profit of H1 lithium products and chromium products in 2022 was 1,001 million yuan and 112 million yuan respectively, increasing 2333.3% and 234.1% year-on-year in that order, accounting for 89.6% and 10% of total gross profit, respectively. In terms of gross margin, benefiting from the price boom of main products and lower unit costs, the gross margin of H1 lithium products increased 53.3 pct to 94.5% year on year in 2022, and the gross margin of chrome products increased 45 pct to 72% year on year.
The volume and price of lithium concentrate have increased dramatically, and the profit per ton is considerable. (1) Volume: In 2022, H1 lithium concentrate achieved sales of 6840.6 tons and industrial-grade lithium carbonate was 198.27 tons. As of the end of June, lithium concentrate and lithium salt inventories were 3810.66 tons and 494.449 tons respectively. At the same time, according to public investor questions and answers, the company plans to produce 9,500 tons of lithium concentrate in 2022. (2) The company promotes new processes and technologies such as three-dimensional crystallization and dynamic halogenation. According to the announcement, the company expects the grade of lithium concentrate to be between 50%-70%. (3) Price:
The average price of H1 industrial grade lithium carbonate in 2022 was 395,000 yuan/ton without tax. The company's product pricing went on the market. Based on the estimate of 60% lithium concentrate grade, sales revenue per unit of lithium concentrate was 148,000 yuan/ton. (4) Cost: Based on an estimate of 60% of the lithium concentrate grade, the production cost of H1 lithium concentrate in 2022 is about 8,178 yuan/ton. The production cost of the company's lithium products is low, and the profit margin is considerable.
Salt lake resources have been investigated and equity funds have been implemented, and the 10,000-ton lithium carbonate project continues to advance. (1) In terms of equity, according to the announcement, the proceeds from the sale of the Zabye Salt Lake mine rights were 2.91 billion yuan, with an initial payment of 580 million yuan. The remaining portion was paid over 20 years, with 116 million yuan paid each year. Zabouye mining rights are reported as intangible assets, which are subsequently amortized in accordance with accounting standards. (2) The exploration of Zabouye salt lake resources was completed in 2021, and lithium carbonate holds 1,787,600 tons of LCE, which may facilitate subsequent adjustments in the equity level of Zabouye Salt Lake. (3) The main project of the 10,000-ton lithium carbonate project was constructed by Donghua Technology using the BOO method. The energy supply contract was recently changed to Baowu Clean Energy. The capital expenditure increased slightly, but the progress of the project is certain. The company expects the project to be put into operation before the end of the year 23. Currently, the project has invested 666 million yuan, of which H1 invested 241 million yuan in 2022.
Investment advice: We expect the company to achieve operating income of 2,279, 24.02, and 5.351 billion yuan respectively in 2022-2024, and net profit of 8.3, 908 and 1,973 billion yuan, corresponding to EPS of 1.59, 1.74, and 3.79 yuan/share, respectively. The current stock price corresponding to PE is 33.4, 30.5, and 14 times. Maintain the “Buy-A” rating and target price of 65 yuan/share for 6 months.
Risk warning: Prices of main products fall short of expectations, demand falls short of expectations, project progress falls short of expectations