22Q2 homing net profit improved month-on-month. 22H1's income was 946 million yuan, + 4.76% year-on-year, and its net profit was 2.8175 million yuan,-94.77% compared with the same period last year. The income of 22Q2 company is 541 million yuan,-1.80% compared with the same period last year, + 33.76% compared with the same period last year, and the net profit returned to the mother is 5.0883 million yuan. 22H1 gross profit margin was 11.19%, down 3.10 pct from the same period last year; net profit margin was 0.29%, down 5.68pct from the same period last year. 22Q2 gross profit margin was 12.17%, down 2.13pct from the same period last year, rising 2.30pct month-on-month; net profit rate was 0.93%, down 5.57pct from the same period last year, and 1.50pct up month-on-month.

The price of raw materials and accessories is lower, and the gross profit margin is expected to increase. In the past 21 years, the cooperation mode between the company and Panasonic China has been gradually adjusted for the company to purchase metal nickel beans and metal cobalt beans from Panasonic China to produce NCA ternary precursors and then sell them to them. the changes in the above cooperation methods have led to a decline in gross profit margin and unit gross margin for the sale of NCA ternary precursors to Panasonic China, but can ensure a stable supply of raw materials. The sales price of the company's products is mainly composed of material prices and processing fees, taking into account the decline in the market price of LME nickel and cobalt since the beginning of the year, and the decline in the sales price and cost of the company's main products, which will lead to an increase in gross profit margin when the processing fee remains unchanged. At the same time, the prices of sulfuric acid and liquid alkali, the main auxiliary materials, have decreased, the processing cost has decreased, while the processing fee is relatively stable, and we expect the gross profit margin to increase.

Accelerate production expansion and expect high sales growth in the follow-up. The continuous expansion of the company's production capacity is expected to increase its market share in high-nickel ternary precursors, and we expect the company's sales to maintain high growth in the future. The company has an annual output of 50,000 tons of high-end ternary lithium precursors (NCA, NCM) and 10,000 tons of battery lithium hydroxide project, which is expected to be put into production in October 2022; the annual production of 25000 tons of high-quality NCA and NCM precursors and 6 kiloton battery-grade lithium hydroxide monohydrate construction project has been completed for the project record and is expected to be completed in 2024; the annual output of 50,000 tons of ternary cathode material precursor project is under preparation.

Profit forecast and valuation. We expect the company to achieve a net profit of 1.21,3.75 and 493 million yuan in 2022-24, with a corresponding EPS of 0.24,0.73,0.96 yuan per share. Considering the "conflict between Russia and Ukraine" in 22H1, the fluctuation of raw material prices, the repeated epidemic situation of COVID-19 in China and equity incentive amortization and other factors have a certain impact on the company's return net profit, give the company 25-30X PE in 2023, the reasonable value range is 18.25-21.90 yuan per share. We estimate that the BPS of the company in 2022-24 will be 2.93,3.66,4.62 yuan per share. Considering that the company has a certain first-mover advantage in the field of high-nickel ternary precursors, we give the company 5.0-6.0x PB in 2023, with a reasonable value range of 18.30-21.96 yuan per share. Combining the two valuation methods of PE valuation and PB valuation, we think that the reasonable value range of the company is 18.30-21.90 yuan per share, which is rated as "better than the market".

Risk hint. (1) the competition intensifies, which affects the company's market share and gross profit margin. (2) the fluctuation of the price of raw materials affects the gross profit margin. (3) the impact of the epidemic continues and affects the utilization rate of the company's production capacity.