Domestic leading ceramic membrane enterprises, self-developed aluminum and titanium adsorbents with high added value and high barriers have the ability to industrialize, and have successfully opened the full business chain of membrane + adsorbent; they have won bid for a number of salt lake lithium extraction adsorbents and membrane section projects. the commercialization ability of the company's adsorbent products is being gradually verified, and it is expected to fully cut into the salt lake lithium extraction market to help the company's performance elastic release. It is estimated that the company's net profit in 2022-2024 is 0.65 billion yuan.

First coverage, given a "buy" rating, with a target price of 39 yuan.

Ceramic membrane faucet, open the membrane + adsorbent full chain to extract lithium from salt lake. The company is incubated in Nanjing University of Technology, with strong technological innovation genes, and has a complete business system, including membrane material production, membrane module and complete equipment manufacturing, and membrane integrated technology solutions, and the domestic ceramic membrane leading position is consolidated. The company used membrane as a breakthrough to cut into the salt lake lithium extraction business earlier. At present, the company's lithium extraction adsorbent has large-scale production capacity, and the whole industry chain of membrane + adsorption is being opened up. Effectively enhance the competitiveness of the company's salt lake lithium extraction business and provide support for the company's long-term development.

Adsorbent is the key to extracting lithium from salt lake, and the market space is expected to be about 10 billion in 2025. Membrane separation technology has a large market scale and a wide range of downstream applications, but in recent years, the overall competition in this field is fierce. The demand for lithium extraction from salt lakes using adsorption + membrane is growing rapidly. The scale of domestic projects of lithium extraction from salt lakes is more than 400,000 tons / year. We expect the market scale of adsorbents and membranes for lithium extraction from salt lakes to increase to the order of 10 billion yuan in 2025.

The adsorption section of lithium extraction from salt lake has high added value and deep barrier, and the added value of the adsorption section obviously exceeds that of the membrane section. At present, aluminum series adsorbents have been relatively mature, while mn-Ti series adsorbents are gradually moving towards large-scale commercial applications.

The traditional membrane business continues to be sound, and a new adsorption growth curve is just around the corner. The company completed the world's first 10,000-ton full-membrane project for extracting lithium from salt lake as early as 2018, and the total package capacity of the project has been verified; the company's aluminum and titanium series adsorbents are developed in parallel and the titanium system is expected to run rapidly in industrialization, according to the company's announcement, the adsorbent with a planned production capacity of 6000 tons / year has been put into production one after another; the company has won a number of salt lake lithium extraction projects and the adsorbent is progressing smoothly in the bid-winning project. The whole chain of business with total package capacity, membrane and adsorption will be opened. 2023 will be the year when the company's adsorption product performance will be verified in the industrialization of the bid-winning project. if the effect is good, it will lead to the rapid growth of the company's performance in 2024. The expected growth of the company's performance will change the sound performance of the membrane business in the early stage and enter the accelerated growth cycle.

Risk factors: the risk that the macroeconomic recovery is not as expected; the risk of the change in the technological route of lithium extraction from the salt lake; the risk that the construction and capacity expansion of the company's lithium extraction project in the salt lake is not as expected; the risk that the company's membrane materials and equipment sales are not as expected; the risk that the company's new orders for adsorbent sales are lower than expected.

Profit forecast, valuation and rating: the traditional membrane business returns to normal with the end of the epidemic, and the adsorbent business is expected to grow rapidly with the company's product performance verification in bid projects and the high demand for lithium extraction. We expect the company's net return profit for 2022 to 2024 to be RMB 0.65 million, corresponding to a year-on-year increase of-7%, 67%, 92%, and the current stock price, corresponding to PE, is 61-36-19 times. Considering that the company's adsorption business is in the initial stage of large-scale industrialization and the growth of membrane technology business is relatively slow, the comparable company Lanxiao Technology 33 times PE in 2024 (Wind consensus expectation) gives the company a 30% valuation discount, corresponding to the company's 2024 target PE of 23 times, equivalent to the target price of 39 yuan. Cover for the first time, giving a "buy" rating.