Incident: Net profit for the first three quarters of 2022 was 15.981 billion yuan, an increase of 2916.44% over the previous year; in the third quarter, net profit of 5.654 billion yuan, -19.2% over the previous quarter.
Comments:
Non-recurring profit and loss affected Q3 results month-on-month. According to the company's 2022 mid-year report, after the listing of the SES company in which Q2 Company participated, the company changed its shares in SES from long-term equity investment to investment income generated from investment in other equity instruments, generating non-recurring income of 1,207 million yuan.
Downstream demand is strong, and lithium prices have reached another record high. As of October 29, 2022, the prices of battery-grade lithium carbonate and lithium hydroxide reached 537,500 yuan/ton and 538,300 yuan/ton respectively, up 99.1% and 149.1% respectively from the beginning of the year, and both reached record highs. At the same time, Australian mining Pilbara auction prices have repeatedly reached new highs, forming strong support for lithium prices.
The scale and resource advantages are outstanding: the annual production capacity of the company's lithium chemical products reached 68,800 tons. According to production in 2021, the company is the second largest supplier of battery-grade lithium carbonate in the world. Australia's Quinana lithium hydroxide project with an annual output of 48,000 tons and the Suining Anju lithium carbonate project with an annual output of 20,000 tons are in the trial production or construction stage, while Chongqing's Tongliang project with an annual output of 2,000 tons of lithium metal metal is in the planning and construction stage. The total production capacity of the company's medium-term lithium chemical products is over 110,000 tons/year; the total production capacity of Thalyson lithium concentrate reaches 1.62 million tons/year, and the planned production capacity exceeds 2.1 million tons/year.
The company strengthens the new downstream layout of the industrial chain. The company and China Innovation Aviation signed a “Strategic Partnership Agreement”, and the two sides decided to join hands to carry out cooperation in various fields such as batteries and battery materials, new materials, lithium salt, lithium ore, etc.; Tianqi Chuang Lithium, a wholly-owned subsidiary of the company, and Beijing Weilan signed a “Cooperation Agreement” to jointly invest in the establishment of a joint venture to jointly engage in R&D, production and sales of pre-lithiated manufacturing equipment products.
Company shares are bought back through centralized bidding transactions for employee stock ownership plans. On September 23, 2022, the company repurchased the company's shares for the first time through centralized bidding transactions. This time, 1,7803.66 million shares were repurchased. The share that has been repurchased accounts for 0.11% of the company's total share capital, and the company's employee incentive system has been further improved.
Profit forecast and rating: Given that lithium prices are still on the upward trend and the performance of our affiliated company SQM is growing, we have raised our profit forecast. We expect 2022-2024 EPS to be 12.66 yuan, 13.94 yuan, and 14.79 yuan respectively, up 7.5%, 6.4%, and 5.1% respectively, corresponding to 8X/7X/6X for 2022-2024 PE. In light of the company's leading position in the global industry and the gradual improvement of its capital structure, we maintain our “increase in holdings” rating.
Risk warning: downstream demand falls short of expectations; industry supply-side production capacity is released too quickly; company project construction falls short of expectations; safety and environmental risks; overseas operation risks; risks of changes in technology paths, etc.