Incident description
The company released a performance forecast for the first three quarters of '22. It is expected to achieve net profit of 15.2-16.9 billion yuan in the first three quarters, an increase of 2768.96%-3089.83%; it is expected to achieve net profit of 142-15.8 billion yuan, an increase of 11747.89%-13060.33%, converted to basic earnings of 9.97-11.08 yuan per share. Net profit attributable to the mother is expected to be 50-6.5 billion yuan in the third quarter, an increase of 1026.10%-1363.92%; it is expected to achieve net profit of 4,998-6.48 billion yuan, an increase of 3625.46%-4687.34%; converted to basic earnings per share of 3.09-4.01 yuan.
Incident reviews
Lithium salt prices have reached a new high, and the company's performance continues to exceed expectations. Benefiting from a number of positive factors, such as the rising popularity of new energy vehicles around the world, the accelerated expansion of production capacity by lithium-ion battery manufacturers, and the recovery in orders for downstream cathode materials, the company's lithium product sales and prices have increased significantly. The production capacity of the Taillison tailings depot project, which produces 280,000 tons per year, continues to climb, gradually approaching full production capacity of 1.62 million tons/year. As of October 14, the average spot prices of battery-grade lithium carbonate and battery-grade lithium hydroxide were 54.50 and 525,500 yuan/ton respectively, up 25.40 and 293 million yuan/ton from the beginning of the year. The increases were 87.29% and 126.29% respectively. At the same time, the participating company SES was listed on the New York Stock Exchange to confirm investment income, and the third quarter performance of the joint venture company SQM is expected to improve dramatically, jointly driving the company's performance to continue to grow at a high level.
With the world's high-quality lithium resources, the advantage of low cost is obvious. The company's holding subsidiary, Terlison, owns the Greenbush lithium spodumene mine in Australia, accounting for about 38% of global lithium production in 2021; its wholly-owned subsidiary Shenghe Lithium owns mining rights for the Zola spodumene mine in Yajiang County, Sichuan and is promoting mine restart work; it owns Atacama Salt Lake Resources through SQM, which has the world's largest lithium brine resources and reserves, and achieved sales of 72,300 tons of lithium and its derivatives in the first half of the year. The company's lithium concentrate is 100% self-sufficient and costs only $271/ton (average cost is about $386/ton).
Lithium salt production capacity continues to expand, and upstream and downstream synergies are obvious. The company currently has a production capacity of 68,800 tons/year for lithium compounds and derivatives. Australia's Quinana Phase I lithium hydroxide project with an annual output of 24,000 tons is in trial production. The second phase of the 24,000 tons of lithium hydroxide will be built in due time; the Suining Anju 20,000 ton battery-grade lithium carbonate project is expected to be completed in the second half of 2023; the Tongliang 2000 ton lithium metal project is being planned and constructed; the planned future production capacity is 114,800 tons/year. The company signed long-term supply contracts with German Nano and LG Chemical, and signed cooperation agreements with downstream China Innovation Aviation and Beijing Weilan to maximize the company's existing resource advantages and form synergies.
Leverage has been reduced in the issuance of Hong Kong stocks, and employee shareholding plans are tied to talent. After the Hong Kong stock was issued, the company's financial situation improved markedly. By the end of July, the company had repaid all M&A loans and some other financial liabilities, and the company's balance ratio is expected to drop to about 28% (unaudited). In addition, the company plans to buy back a total of 136.200 million yuan of shares for employee shareholding, with a repurchase price of no more than 150 yuan/share; the transfer stock price is 0 yuan/share, and the lock-up period is 3 years. The assessment results show that the company's lithium chemical product production capacity will reach 90,000 tons of LCE by the end of 2024.
Investment advice
The company's 2022-2024 EPS is expected to be 13.62\ 14.75\ 15.47 respectively, corresponding to the closing price of the company's A shares on October 14 at 101.92 yuan, and the 2022-2024 PE is 7.5\ 6.9\ 6.6 times respectively, covering the “buy-B” rating for the first time.
Risk warning
The forecast data is only preliminary accounting data, and there is a risk of correction in the later stages; there is a risk that lithium salt prices will fluctuate drastically; downstream lithium battery demand falls short of expected risks; the project capacity investment progress falls short of expected risks; and the macroeconomic growth rate falls short of expected risks.