Investment events

In 2022, the company's total revenue was 3.302 billion yuan, an increase of 27.99% over the previous year, and the net profit of the mother was 117 million yuan, an increase of 87.60% over the previous year. According to single-quarter data, total operating revenue for the fourth quarter was 623 million yuan, a year-on-year decrease of 15.35%, and net profit for the fourth quarter was 99335 million yuan, a year-on-year decrease of 25.39%.

Key points of investment

Benefiting from the release of production capacity for new energy materials and rising metal prices, the company's performance in 2022 grew rapidly, and the company's net profit returned to its mother increased 87.60% year-on-year in 2022, mainly due to higher prices of metal materials, the gradual increase in production capacity of new energy materials, and the accelerated implementation of product development. Among them, revenue and profit in the fourth quarter both declined to a certain extent year-on-year. We believe that PCB chemicals were mainly affected by the downturn in the consumer electronics market.

With a comprehensive shift to lithium battery materials, the phosphoric acid production system gradually generated revenue of 1,293 billion yuan for lithium battery materials in 2022, an increase of 318.8% over the previous year; gross margin was 16.65%, an increase of 5.52 percentage points over the previous year. In terms of new energy cathode materials, the company has 14,000 tons/year of lithium iron phosphate cathode materials and 14,000 tons/year of iron phosphate precursor production line; in terms of power battery recycling, it has a comprehensive recycling production line for decommissioned lithium batteries with a processing capacity of 10,000 tons/year, a sequential utilization production line for decommissioned batteries with a processing capacity of 40,000 tons/year, and a fine dismantling production line with a processing capacity of 40,000 tons/year. At the same time, it plans to invest about 3 billion yuan to build a benchmark for lithium battery materials that produce 100,000 tons/year project.

A new breakthrough was made in the chemical business. The development of chemicals such as PET copper foil, electroplated copper, sodium batteries, etc. In 2022, the PCB chemicals business achieved revenue of 1,444 billion yuan, a decrease of 15% over the previous year; the chemical reagent business achieved revenue of 391 million yuan, an increase of 28% over the previous year. In the field of PET copper foil, the company's products include high-purity metal salts such as copper oxide and copper sulfate, additives such as SP series water plating agents, and chemical reagents such as sulfuric acid and sodium hypochlorite. At present, the company's hole-filling electroplating VCP17 solution system has been successfully developed, and the TP capacity of PCB through holes has increased by 8-10%, far higher than the technical level of peers; copper oxide and copper sulfate pentahydrate have passed SCS Global Services certification for copper recycling. In the field of sodium batteries, the company has launched a series of products such as high-purity sodium carbonate, battery-grade sodium fluoride, sodium oxalate, etc. for electrolytes, cathode and cathode sodium supplements, etc., which have the advantages of high purity, low moisture, small particle size, and low anion content.

Profit forecasting and valuation

Lower the profit forecast and maintain the “buy” rating. According to data from the Shanghai Nonferrous Metals Network, the price of lithium carbonate fell from more than 500,000 yuan/ton at the end of December 2022 to about 350,000 yuan/ton on March 14, 2023, and the prices of other materials such as iron phosphate all declined to varying degrees. Therefore, we lowered the company's net profit from 23-24 to 239 million yuan and 374 million yuan. The forecast for additional 2025 was 495 million yuan. The corresponding EPS was 0.58, 0.94, 1.24 yuan/share. The corresponding PE was 36, 22, 17 times, maintaining the “buy” rating, respectively.

Risk warning

New product and technology development risks; increased competition in the recycling industry; risk of material price fluctuations.