Lithium chromium resources double bibcock, close look at chromium and far look at lithium
The company is based on Tibet Luobusa Chrome Mine and Zabuye Salt Lake and other high-quality mines, engaged in chromium mining, salt lake lithium extraction, Tibet's state-owned mining development of the only listing platform. At present, it has a production capacity of 60, 000 tons / year of chromite and 8000 tons / year of lithium ore. The 100000 tons / year chromium ore project under construction is expected to be put into production in 2017 (may be delayed), while the production line of 180 million tons / year lithium ore is delayed due to technical problems. 2016H's operating income was 275 million yuan, down-34% from the same period last year, mainly due to a sharp decline in product output. Among them, the income of chromium and lithium products is 60 million yuan and 125 million yuan respectively, accounting for 22% and 45% of the business income respectively, which is the main source of income of the company. The net profit of 2016H was 40 million yuan, up 171% from the same period last year, mainly due to the increase in gross profit due to the high prices of lithium carbonate and chromium ore. The gross profit of 2016H lithium and chromium products is 11 million yuan and 89 million yuan respectively, accounting for 10% and 83% of the total gross profit, which is the main source of profits of the company.
Lithium: have the best resources and wait for technological breakthroughs
The company has the largest lithium reserves (1.53 million tons), the highest average lithium concentration (0.12%) and the lowest magnesium-lithium ratio (0.008) in Zabuye Salt Lake, but it is difficult to exploit because it is located in high altitude areas. It has 8000 tons / year lithium ore using solar pond concentration method, 2000 tons / year lithium carbonate and 2000 tons / year lithium hydroxide production capacity, which is still not up to production. The solar pond concentration method is still used in the second phase of 18000 t / a lithium mine project and its supporting projects. at present, the process is being further optimized and construction is temporarily suspended. However, due to the high price of lithium carbonate at 110000 yuan per ton, although the output decreased in the first half of the year, the profit situation was good. We believe that once the large-scale low-cost salt lake lithium extraction technology breakthrough, the company's performance growth space is huge.
Chromium and copper: chromium price rebounds but output shrinks, and the prospect of 100000 t / a chromium ore project is optimistic.
Based on Luobusha Chrome Mine, the company has 60,000 tons of chromium mineral energy per year, which is the largest chromium mine in China. It has a production capacity of 1500 tons / year of electrolytic copper and 5000 tons / year of electrolytic copper and its supporting capacity has been delayed due to the decline of copper price and the low grade of copper ore. The fixed increase of 469 million yuan raised by the company for 100000 tons / year chromite development project has been completed. The developed chromite of 0.702 square kilometers in the south of Luobusa I and II ore group has large chromite reserves (1.7 million tons) and high grade (47.41%). The project is scheduled to be put into production in 2017 and reach production in 2018. According to the feasibility report, the annual net profit will reach 84.72 million yuan after reaching production.
As of October 17, the price increase of South African Cr44% chromium concentrate powder in Shanghai Port has risen to 51 yuan per tonnage, up 59% from the same period last year and 104% from the beginning of the year. Chrome ore is mainly used in the production of ferrochromium and 90% is used in the production of stainless steel industry. China's production increased by 8% in the first half of 2016, which is the main reason for the increase in demand and prices for chromium ore. In 2015, the global output of chromium ore reached 31 million tons, while China produced only 12-150000 tons, and imported 10.4 million tons of chromium ore. We believe that the supply of chromium ore will continue to be tight in 2016, and the price segment is still strong. However, the slowdown in stainless steel production growth will lead to a slowdown in chromium demand, and there will be long-term pullback pressure in prices.
Profit forecast and valuation: investment rating "buy", target price "22 yuan per share"
Based on the assumption that the output of 2016E/2017E/2018E chromium ore is 20 000 tons / 20 000 tons / 50 000 tons and the output of lithium ore is 2000 tons / 3000 tons / 3000 tons respectively, it is estimated that the attributable net profit of the company's 2016E/2017E/2018E is 48 million yuan / 71 million yuan / 136 million yuan respectively, the corresponding EPS is 0.09 yuan / 0.14 yuan / 0.26 yuan, and the corresponding BPS is 4.13 yuan / 4.27 yuan / 4.53 yuan respectively. Using PB valuation, corresponding to 5.16 times PB in 2017, the target price is "22 yuan per share", and the investment rating is "buy".
Risk hint
The output of lithium chromium is not as expected, the price callback of lithium chromium is higher than expected, and the production of chromium project is not as expected.