Event: Hanrui Cobalt Industry released its report for the third quarter of 2022, with operating income of 3.96 billion yuan in the first three quarters, an increase of 23.60% over the same period last year, net profit of 254 million yuan, down 47.82%, and non-net profit of 284 million yuan, down 47.71% from the same period last year. In the third quarter of 2022, the operating income was 1.167 billion yuan, up 3.85% from the same period last year; the net profit was-51 million yuan, down 139.4% from the same period last year; and the non-net profit deducted from the mother was-44 million yuan, down 128.85% from the same period last year.
Capacity expansion is advancing steadily, copper and cobalt prices are in a downward channel, and high-priced cobalt historical inventories are a drag on earnings.
① price: copper and cobalt prices have fallen from their highs since the second quarter, and Q3 copper and cobalt prices continued to decline in 2022 compared with the same period last year. The flood in Durban Port in April this year restricted the transportation of raw materials, and high-priced raw materials arrived in China after the resumption of logistics in the third quarter. The average price of Q3 LME copper in 2022 was 7724 US dollars / ton, down 17.78% from the same period last year and 18.71% from the previous month. The price of MB standard cobalt is as low as $25.75 / lb, down 31.81% from the same period last year and 6.51% from the previous month.
② quantity: according to the company announcement, the company has a production capacity of 41000 tons of electrolytic copper, 10,000 tons of cobalt hydroxide, 5,000 tons of cobalt powder and 10,000 tons of new cobalt materials: the company's 5,000 tons of cobalt powder technical renovation project has been put into production in March 2022, and the production capacity of cobalt powder has increased from 3,000 tons to 5,000 tons; the 5,000 tons of cobalt hydroxide project was put into production in June 2022, and the production capacity of cobalt hydroxide expanded to 10,000 tons. The first phase of Ganzhou project has successfully put into trial production of the new cobalt material with a metal content of 10,000 tons per year in July.
Plus Indonesia Nickel and Cobalt project, continue to develop new energy track. The company and Huabao Industrial Park Investment Group Co., Ltd. signed a "Memorandum of Cooperation" on the construction of 60,000 tons of nickel high-pressure leaching project. Hanrui or its designated party holds a stake of no more than 70% of the project company. The company plans a long-term production capacity of 26000 tons of precursors, assuming that the production line fully produces high-nickel products, corresponding to the demand for 13,000 tons of nickel metal. The signing of Indonesia Wet Nickel-Cobalt Project Cooperation Memorandum, plus Indonesian nickel-cobalt resources, is expected to enrich long-term raw material protection for integrated production capacity.
Administrative expenses shrank on a month-on-month basis, and rates declined during the period. In 2022, Q1-Q3 three fees totaled 204 million yuan, an increase of 42.88% over the same period last year, and the three fee rate was 5.16%, an increase of 0.69pct over 4.47% of the same period last year and a decrease of 0.76pct from 5.92% of the report. In the third quarter, the three fees totaled 39 million yuan, of which: sales expenses 4 million yuan; management expenses 39 million yuan, month-on-month-53.26%; financial expenses-3 million yuan. In 2022, Q1-Q3 spent 39 million yuan on research and development, accounting for 0.98% of the current revenue, which is the same as the same period last year.
Investment advice: due to the obvious decline in copper and cobalt prices during the year, we adjust the copper and cobalt prices for the whole year to 8700 US dollars / ton and 30 US dollars / pound. In the future, with the gradual progress of the company's new materials and Indonesian projects, we think the company still has a good room for development. We estimate that the operating income of the company from 2022 to 2024 will be 59.25,79.42 and 8.937 billion yuan respectively, and the net profit will be 4.58,5.67 and 605 million yuan respectively. The corresponding EPS is 1.48,1.83,1.95 yuan per share, and the current stock price corresponding to PE is 26.9,21.8,20.4 times. Maintain the "buy-A" rating with a 6-month target price of 55 yuan per share.
