Main points of investment
The Little Giant of Lithium Industry covered by the whole industry chain: the company is located in Guangzhou, started with asphalt business in 1998 and distributed lithium mining in 2009, and has now formed a complete industrial chain of lithium resource development, lithium battery materials and lithium battery equipment business. 2022H1's lithium mining business accounts for 45 per cent of gross profit.
Lithium industry: deeply embrace new energy vehicles + energy storage, medium-and short-term supply continues to be tight. The demand for lithium ore is mainly increasing in the field of new energy vehicles and energy storage, while the development cycle of lithium resources is long, the supply bottleneck still exists in the short and medium term, and the supply tight pattern continues. Spodumene resources in China are mainly concentrated in Sichuan, with high grade and strong competitive advantage in comprehensive development cost, but the degree of development is low at present, so the development of Sichuan mine is the key to the safety of lithium resources in China.
Lithium resources: high-growth Sichuan mine new star: 1) high-quality methyl carbide pyroxene ore, mining cost advantage is obvious. The company's mines have ore reserves of 28.995 million tons, with an average grade of more than 1.42%. Methyl carbide spodumene has high lithium oxide content, superior mining conditions, and some orebodies are exposed to the surface with positive topography, which is suitable for open-pit mining with low production cost. At present, the mining scale of the mine is 105 million tons / year, the mineral processing scale is 450,000 tons / year, and the annual output of lithium concentrate is 70-80,000 tons. 2) the Yuanyang Dam project is about to land, and the resources can be increased rapidly. The company's 2.5 million tons / year lithium concentrate mineral processing project is in progress and has entered the stage of publicity. Construction is expected to start this year. After completion, it may have a mineral processing capacity of 470000 tons of lithium concentrate and will become the largest local producer of lithium concentrate in China.
Lithium salt business: orderly expansion, matching resources. The main implementers of the lithium salt smelting process of the company are Chengdu Rongjie (40% of the company and 40% of the parent company Rongjie Group; raw materials are lithium concentrate) and CK Hutchison Huali (the company holds 80% of the shares and the raw materials are crude lithium carbonate or industrial grade lithium carbonate). Chengdu Rongjie currently has a capacity of 20,000 tons per year of lithium salt in the first phase, and will enter formal production in July 2022; the second phase of the 20,000-ton project is expected to match the pace of expansion; in addition, the company said that the problem of competition with the parent company in the same industry will be solved within five years. CK Hutchison Hualim currently has a production capacity of 3000 tons of battery-grade lithium carbonate and 1800 tons of lithium hydroxide.
Lithium equipment business: relying on BYD, steady development. Lithium power equipment customers are mainly leading enterprises in the lithium battery industry, mainly its strategic shareholder BYD and so on. Dongguan Derry has a R & D team of nearly 100 people and several industry-leading technical equipment, with strong R & D and production strength.
Profit forecast and investment rating: we predict that the company's income from 2022 to 2024 will be 35x55 / 7 billion yuan, a year-on-year growth rate of 280%, 57% and 27%, respectively, and its net profit will be 100 million yuan in 22-36-54, respectively. the year-on-year growth rate was 3108%, 63% and 52%, respectively. The corresponding PE is 14 Compact 8 Compact 6x, respectively. Here, we select Ganfeng Lithium, Tianqi Lithium Industry and other comparable companies, and get that the average PE of the company from 2023 to 2024 is 10max 7x; the company's valuation is lower than the comparable company's average; considering the company's rich lithium resource endowment and high-speed growth in mineral processing, the valuation is relatively low, so it gives the company a "buy" rating for the first time.
Risk tips: demand is lower than expected; project progress is not as expected; environmental protection costs are rising.