Incidents:
The company released its 2022 semi-annual report. 2022H1 achieved revenue of 997 million yuan, an increase of 194.44% over the previous year, and Guimu's net profit was 576 million yuan, an increase of 4444% over the previous year; 22Q2 achieved revenue of 509 million yuan, an increase of 124.79% over the previous year, an increase of 6.51% over the previous year, and Guimu's net profit was 322 million yuan, an increase of 2861% over the previous year, an increase of 26.77% over the previous year.
Commentary:
Lithium ore production is going smoothly, and full production is expected throughout the year. 2022H1's lithium concentrate production was 23,700 tons, with sales volume of 23,000 tons, equivalent to 6% grade 18,900 tons, of which Q2 produced 19,500 tons, with sales volume of 20,000 tons. 2022H1's lithium concentrate sales were 290 million yuan. After offsetting unrealized internal transaction profits with associated companies, it reported lithium concentrate revenue of 174 million yuan and net profit of 193 million yuan. There is still revenue of 116 million yuan and corresponding profit not confirmed. This part will be gradually confirmed in the second half of the year along with lithium concentrate consumption and lithium salt sales. With the end of the Q1 winter break, the company's lithium concentrate production capacity is close to full production. The annual lithium concentrate production is expected to be 70,000 tons.
Chengdu Rongjie's lithium salt inventory has increased, and profits are expected to be released in the second half of the year. 2022H1's lithium salt business achieved revenue of 621 million yuan. The company sold a total of 2006 tons of lithium salt, of which Changhe Huali produced 1,515 tons. The first phase of the Chengdu Rongjie 20,000 ton lithium salt project, in which the company participated, was officially put into operation in July. A total of 6,670 tons of battery-grade lithium salt were produced during the trial production phase in the first half of the year, and 4190 tons were sold.
The company's inventory increased by 2,480 tons in the first half of the year. The main reason was that the price of lithium in Q2 fell. The company determined that the price of lithium salt in Q3 would rise, so it adjusted the pace of sales and led to an increase in inventory. According to statistics from SMM on August 26, the price of battery-grade lithium carbonate was 466,000 yuan/ton, up 17,000 yuan/ton from the price of 469,000 yuan/ton on June 30. The price of lithium salt began to rise again. It is expected that the company will usher in the release of one poly run in the second half of the year, and the performance is expected to exceed expectations.
Yuanyangba has 470,000 tons of lithium concentrate, and the company's total lithium concentrate can meet 150,000 tons of lithium carbonate.
The company is planning a 2.5 million tons/year lithium ore selection project in Yuanyangba, which can supply about 470,000 tons of lithium concentrate per year. It will be the spodumene ore selection project with the largest domestic production capacity at present. Some of the pre-construction requirements of the project have been completed, but since the EIA for the “Kanglu Industrial Concentration Zone Master Plan in Ganzi Prefecture, Sichuan Province (2021-2035)” has not yet been approved, the EIA for the first half of the year has not yet met the application requirements. According to the design of the research report, the construction cycle of this project is one year. After completion, the total beneficiation capacity of Rongjie lithium concentrate can reach 920,000 tons, corresponding to about 153,000 tons of lithium carbonate.
Lithium battery equipment+lithium salt, the company cooperated more deeply with BYD. 2022H1's lithium battery equipment achieved revenue of 188 million yuan, an increase of 56.11% over the previous year. The company's lithium battery equipment business mainly guarantees the delivery needs of strategic customer BYD. Sales to BYD in the first half of the year were 183 million yuan, accounting for 97%. Furthermore, in June 2022, Chengdu Rongjie, in which the company participated, signed a lithium carbonate supply cooperation agreement with BYD. 2022H1 achieved sales revenue of 185 million yuan for BYD in the lithium salt business, and the cooperation between the company and BYD deepened.
Profit forecasts
It is estimated that the company's net profit for 2022/2023/2024 will be 18.23/29.16/4,050 billion yuan, the corresponding EPS will be 7.02/11.23/15.60 yuan, and the corresponding PE will be 18.20/11.37/8.19 times. Considering the level of peers, the company will be valued 12 times in 2023. The corresponding target price is 134.8 yuan. First coverage, giving a “recommended” rating.
Risk warning
There are risks such as demand falling short of expectations and a sharp drop in lithium prices.