Event comment
On September 22, 2022, the company announced that it signed a cooperation framework agreement with Yugao Chemical, Yulin Chemical and China Fluorotaihua to jointly build 600,000 tons / year lithium battery electrolyte plant, 500,000 tons / year dimethyl carbonate (DMC) production plant, lithium hexafluorophosphate and supporting equipment. The registered capital of lithium hexafluorophosphate and electrolyte project company was initially set at 1.2 billion yuan and 1 billion yuan, and the company's shareholding ratio was 34% and 51% respectively.
The company actively expands the production of electrolyte and gives full play to the advantage of industrial chain integration. At present, with the rapid development of lithium battery industry, the demand for electrolyte continues to rise. Lithium battery shipments in China were 327GWh in 2021, an increase of 130% over the same period last year, according to Gao Gong Lithium data. In addition to this project, the company plans to put in a total electrolyte production capacity of 700000 tons from 2022 to 2024. The electrolyte device to be built this time will further give full play to the advantages of the company's integrated electrolyte industry chain and promote the efficient development of lithium materials business.
The company's DMC products are expected to rise in both volume and price. The company is the leader of domestic electrolyte solvents, and the global market share of carbonate solvent shipments exceeds 40% in 2021. The expansion of the 500000-ton DMC production plant will help to consolidate the company's leading position in solvents, and both parties to the agreement will give full play to their respective advantages. In addition, DMC prices have risen since April 2022. According to Wind data, as of September 27, 2022, the company's DMC ex-factory price was 6700 yuan / ton, up 17.5% from early April 2022. Capacity expansion in conjunction with the industry boom, the company's products are expected to achieve both volume and price rise.
The layout of lithium hexafluorophosphate helps to enhance the competitive advantage of the company's electrolyte products. Lithium salt is the core part of the electrolyte. The performance of lithium salt determines the ionic conductivity, high and low temperature stability of the electrolyte. According to the Huajing Industrial Research Institute, lithium salt accounted for 45% of the electrolyte cost of lithium batteries in 2021, accounting for the highest proportion. Lithium hexafluorophosphate is the most mainstream variety of lithium salt at present. the cooperation between the company and China Fluorotaihua is conducive to the rapid expansion of the company's lithium hexafluorophosphate capacity, smooth the fluctuation of raw material prices, and enhance the competitive advantage of the company's electrolyte products. good for the company's long-term development.
Overall, the company's expansion of electrolyte production is expected to further increase the market share in the future, while the layout of electrolytes and solvents to further improve the industrial chain, enhance the core competitiveness, consolidate the leading position.
Investment suggestion
Based on the uptrend of the company's main business, the company's new production capacity has been gradually put into production, bringing new room for growth. It is expected that the company will continue to perform well in the next few years. It is expected that the company's operating income and net profit will be 7934, 10273, 20262 million, 1.409, 18.18, 2.464 billion and 6.95, 8.97, 12.16 yuan per share respectively, respectively, with the closing price of 98.30 yuan on September 28, 2022 as the benchmark, and the corresponding PE of 14.14, 10.96 and 8.09, respectively. Combined with the prosperity of the industry, optimistic about the future development of the company. Maintain the "highly recommended" rating.
Risk hint
Lithium battery production capacity is lower than expected, safety and environmental protection policies are upgraded, domestic epidemic situation is repeated, and so on.