Event: the company released the third quarter report of 2022, the first three quarters of 2022 operating income of 894 million yuan, year-on-year + 15.79%, of which Q3 operating income of 360 million yuan, year-on-year + 25.45%, month-on-month + 27.05%. The net profit in the first three quarters of 2022 was 127 million yuan, + 254.31% compared with the same period last year, of which the net profit of Q3 was 71 million yuan, + 360.81% year-on-year and + 88.38% compared with the same period last year.
Tiancheng lithium has been merged, and the profit space of lithium sulfate business is considerable. (1) in September 2022, the company completed the increase of its shareholding in Tiancheng Lithium Industry and now holds 51% of its equity, forming a holding relationship and reporting in three quarters. In addition, from January to August 2022, the company still calculates the profit contribution of Tiancheng Lithium Industry according to investment income, the value of the project is 56 million yuan. (2) Price: in the first three quarters of 2022, the average price of battery-grade lithium carbonate was 4.58 million yuan / ton, + 403.5% compared with the same period last year, of which the average price of Q3 was 482,000 yuan / ton, + 339% from the same period last year, and + 2.4% from the previous year. According to a public investor Q & A, Tiancheng Lithium Industry's existing lithium sulfate production capacity is converted into 10,000 tons of LCE, which is mainly priced according to a certain discount proportion with reference to the SMM market price of lithium carbonate. It is expected that as lithium prices rise, the profit space of lithium sulfate business may gradually open. (3) Goodwill: as of the third quarterly report, the book value of the company's goodwill was 438 million yuan, an increase of 387 million yuan compared with the second quarter, mainly due to the company's acquisition of Taian Xinchang and Tiancheng lithium industry.
Xiecheng lithium industry is ready to set up subsidiaries one after another to lay out the lithium industry chain. (1) Xiecheng Lithium Industry currently has a project with an annual production capacity of 6000 tons of lithium carbonate and 6000 tons of lithium hydroxide transferred from Tiancheng Lithium Industry. As the downstream of Tiancheng Lithium Sulfate Mother Liquor, it may form a good synergistic effect with Tiancheng Lithium Industry in the future. (2) according to the company's long-term strategic planning and actual operating needs, the company plans to invest its own funds to set up wholly-owned subsidiaries Ganzhou and Lithium Industry. Hecheng Lithium Industry obtained the Business license issued by Dayu County Administrative examination and approval Bureau on September 22, 2022. (3) the company and Shaoxing Taixu jointly invested to establish Hecheng International, with a registered capital of US $15 million, of which the company contributed US $7.65 million with its own capital and held 51.00% of the shares; Shaoxing Taixu contributed US $7.35 million and held 49.00% of the shares.
Resources are still the core link, and the company has participated in and underwritten Bougouni projects. Through Taian Xinchang, the company indirectly holds 7.23% of the interest in Bougouni project and underwrites no less than 80% of its lithium concentrate products. The concentrate production capacity of the Bougouni project is 238,000 tons per year, and the economic benefit is good.
According to PFS, the capital expenditure of the project is US $154 million, the processing capacity of the concentrator is 2 million tons of raw ore / year, the corresponding concentrate capacity is 238000 tons of SC6/ years, the average lithium yield is 74%, the project has a life of at least 8.5 years, the whole life cycle will produce 2.024 million tons of lithium concentrate, and the average cash cost is US $474 / ton (plus royalties and maintenance fees is US $520 / ton) The average price of the concentrate is 1060 US dollars / ton, the whole life cycle income is about 2.145 billion US dollars, the expected investment payback period is 0.8 years, and the internal rate of return is 91.2 per cent.
Investment suggestion: we expect the operating income from 2022 to 2024 to be 19.32,37.37 and 4.526 billion yuan respectively, and the estimated net profit is 2.09,3.95 and 480 million yuan, respectively, and the corresponding EPS is 1.3,2.46,2.99 per share, respectively. The current stock price corresponds to 33.7,17.8,14.6 times of PE. Maintain the "overweight-A" rating, with a 6-month target price of 52 yuan per share.
Risk hint: lithium price fluctuates sharply, demand is lower than expected, and project progress is not as expected.