2022 and 1Q23 results are in line with market expectations
The company announced 2022 and 1Q23 results: 2022 revenue of 29.392 billion yuan, +52.3% year on year; net profit of the mother was 1,296 million yuan, +40.4% year on year. 1Q23 revenue was 6.129 billion yuan, -12.0% yoy /-23.6% yoy; net profit was 172 million yuan, -48.0% yo/ -40.5% yoy; overall 2022 and 1Q23 performance were generally in line with market expectations. The decline in 1Q23 performance was mainly due to a fire in the cobalt production line workshop, which stopped production in January-January. Profit of cobalt oxide fell by 118 million yuan, which dragged down performance.
Development trends
The competitive position of the new energy business continues to strengthen: the revenue of the new energy battery materials business in 2022 was +59% year-on-year to 21,797 billion yuan, with a revenue contribution of 74%. 1) The shipment volume of the three yuan precursor was +67% over the same period last year to 152,300 tons, and the shipment volume steadily ranked in the top two in the global market. Among them, high-nickel products of 8 series and above accounted for more than 75% of the shipments, and 9 series ultra-high nickel products accounted for 60% of shipments, and the product structure continued to be upgraded with high nickel. 2) Cobalt tetroxide sold more than 14,800 tons, accounting for ~ 20% of global supply, ranking among the top three in the world. 3) Sales volume of cathode materials was 8,450 tons. In terms of profitability, the gross profit per ton of ternary carbon-tetroxide/cobalt tetroxide/cathode material was 1.91/3.26/17,600 yuan respectively, -10% /+3/ +18% over the same period last year. Looking ahead, the company's quarterly report indicates that sales of three yuan carbide and cobalt tetroxide reached 200,000 tons and 18,000 tons respectively throughout the year, which contributed to steady growth in performance.
The battery recycling business opened the second growth pole: the revenue of the urban mining business increased 36% year-on-year to 7.595 billion yuan in 2022, contributing 26% to revenue. Among them, the amount of power batteries recycled and dismantled was +98% to 2.1 GWh, accounting for more than 10% of the total amount of power batteries scrapped in China, revenue was +313% to 622 million yuan over the same period last year, and gross margin reached 16%. Despite large-scale development, it maintained steady profitability. 1Q23 power battery recycling volume increased 97% year on year to 0.62 million tons, and revenue +149% year on year to 194 million yuan. The company's quarterly report directed the recycling of 35,000 tons of power batteries throughout the year to achieve revenue of 2 billion yuan, creating a new performance growth point.
The Indonesian nickel resource project became a new profit growth pole: in 1Q23, the company shipped more than 4,500 tons of metallic nickel MHP1, achieving revenue of US$83 million, with a gross margin of more than 30%; the company expects to ship more than 26,000 tons throughout the year. We believe that the Indonesian nickel resource project is expected to become the company's new profit growth pole. Furthermore, on the basis of the first phase of the Qingmeibang nickel resource project in Indonesia with the production of 30,000 gold tons of nickel/year, and the rapid construction of the second phase of 43,000 tons of metallic nickel/year, the company expects the production capacity of the Indonesian nickel resource project to eventually reach 150,000 gold tons of nickel/year.
Profit forecasting and valuation
Taking into account the impact of the 1Q23 production line shutdown on profits and the significant increase in nickel project contributions, we raised revenue in 23 by 28% to 38 billion yuan, kept the profit forecast unchanged, and introduced net profit of 2.8 billion yuan to the mother in '24 for the first time; the company's current transaction is 16.2/12.8 x 23/24 price-earnings ratio. Maintaining the target price of 9.5 yuan and outperforming industry ratings corresponds to 20.4/16.1x 23/24 price-earnings ratio and 35% upward space.
risks
The release of production capacity fell short of expectations, and market sales prices fluctuated.