Report summary:
Incident: The company released a performance forecast for the first three quarters of 2002. It is expected to achieve net profit of 1,2001.3 billion yuan in the first three quarters, of which Q3 achieved net profit of 60—750 million yuan to the mother, in line with expectations.
The lithium industry continued to boom, the company's lithium salt sales were successfully released, and Q3 performance increased. The company's net profit center for Q3 was 675 million yuan, +4721% year on year and +110% month on month. The sharp increase in performance over the same period was mainly due to the sharp increase in the volume and price of the company's lithium products. 1) Volume: Chengdu Rongjie's Q3 lithium salt sales are expected to increase a lot month-on-month. The reason may be: ① The first phase of the 20,000 tons/year lithium salt project was completed and put into operation at the beginning of the year, and the climbing volume led to a quarterly increase in production; ② the company sold more products in the third and fourth quarter when prices were better in the first half of the year or because of poor sales and shipments; 2) Price: lithium salt prices steadily rebounded in Q3. According to SMM, the average market price of battery-grade lithium carbonate Q3 was 482,000 yuan, a slight increase of 2% over the previous month.
The Yuanyang Dam project is progressing in an orderly manner, and the company's production capacity is expanding rapidly. 1) The EIA plan for the top park has been announced before approval, and construction of the 2.5 million tons/year plant selection project in Yuanyangba has been accelerated. The EIA for the upper level park was announced before approval on September 9. After the EIA for the upper level is approved, the Yuanyangba project will be declared for the EIA. Project EIA is simpler than a park, or can be approved quickly. Overall, the Yuanyangba project is expected to be put into operation in 2023H1; 2) After Yuanyangba is landed, the company's lithium concentrate production capacity will expand from 70,000 tons to 200,000 tons, and is expected to expand further to 470,000 tons in the future. After the Yuanyangba project is put into operation, the company will have a mineral processing capacity of 2.5 million tons/year, a mining capacity of 1.05 million tons/year, and a lithium concentrate of 200,000 tons/year. Subsequent companies may continue to expand mining capacity to 2.5 million tons/year to match mineral processing capacity. At that time, lithium concentrate production capacity will be further increased to 470,000 tons; 3) The methyl card mining area is rich in resource reserves and has a large number of potential mines. As the enterprise with the most extensive mining experience in Sichuan, the company's competitive advantage is highlighted, and storage may be further increased in the long term.
The tight supply and demand situation in the industry will not change, and I am optimistic that lithium prices will remain high. 1) Short-term: Q4 is the peak demand season for new energy vehicles; however, there has been little increase on the supply side. On the one hand, salt lake has entered a production cut/shutdown season, and on the other hand, the epidemic in major lithium producing provinces such as Qinghai and Sichuan has repeatedly disrupted production and transportation. Supply and demand are tightening and lithium prices are rising further; 2) Medium to long term: Nearly 40% of new lithium ore projects overseas have recently been announced to be postponed. The increase in supply in the next two years may be far lower than market expectations. It is expected that the industry will remain in a tight balance between supply and demand, which strongly supports lithium prices to remain high.
Profit forecast and investment recommendations: Net profit is expected to be 21.9/38.2/4.99 billion yuan in 2022-2024.
Considering the high boom in the lithium industry, the company's mining and metallurgical production capacity has expanded rapidly, maintaining the “increase in holdings” rating.
Risk warning: industry demand falls short of expectations, supply exceeds expectations, and the company's production capacity falls short of expectations