The prosperity of the lithium industry continues, and the value of the company needs to be reassessed.
Since the beginning of this year, the lithium sector, especially the upstream resources enterprises as a whole has risen greatly. On the one hand, the rising price of lithium salt has led to an increase in EPS expectations, on the other hand, the market has increased confidence in the industrialization of new energy vehicles and recognized the value of upstream bottlenecks, thus raising the valuation premium for the industry. The company has the highest quality lithium mineral resources in Asia in Ganzi Prefecture, Sichuan Province, with lithium carbonate reserves of 1.02 million tons. If we compare the market value of lithium reserves per ton of standard Tianqi lithium industry and the future resumption of mine production, we think that we can give a 60% risk discount of 65%. The reasonable market value of the company's mine assets is 130.32-14.118 billion yuan, which is somewhat undervalued than at present. In view of the continuation of the business cycle of the lithium industry and the continuous cultivation of the company's own upstream lithium business in recent years, the value of the company's lithium resources has been revalued.
The general trend of new energy replacing traditional energy may be established, and local governments may take measures in accordance with local conditions.
The medium-and long-term trend of new energy vehicles replacing fuel vehicles has been basically established, and the scarcity of lithium and cobalt resources has become increasingly prominent. Because the salt lake is rich in resources, the Qinghai government has put forward a plan to build Qinghai into a 100 billion yuan lithium power industry base in China. Sichuan Province has high-quality lithium ore resources, and the plan of "Lithium Capital of China" has been put on the agenda. According to Chengdu Daily, Rongjie Group, the company's controlling shareholder, plans to spend 6 billion yuan to build a new energy automobile battery industrial park in Qionglai Industrial Park, which further confirms that the local government's support for the lithium industry is unabated, coupled with the promotion of high profit margins. We think that the road of resuming production of the company's lithium mine is a long way off. In particular, on October 19, 2017, Ganzi Prefecture announced the impact of environmental assessment on the expansion project of 1.05 million-ton open-pit mining in Rongda Mining for the first time, which was a key first step for the mine to resume production as soon as possible.
Deep layout of lithium power industry chain, spring flowers are waiting for autumn.
In recent years, the company has not stopped its top-down layout along the lithium industry chain. The acquisition of Dongguan Derui (65% equity), acquisition of Changhe Huali (80% equity) and Rongjie Metal (20% equity) all demonstrate the company's strategic intention to expand deeply in the lithium power industry. The company currently has a mining and separation capacity of 450000 tons of lithium ore (to be resumed), which may be expanded to 1.05 million tons in the long term, with a planned annual output of 22000 tons of lithium salt plant. In addition, CK Hutchison Huali has an annual production capacity of 3000-5000 tons of lithium salt, Rongjie Metal has an annual production capacity of 700 tons of cobalt series main products (measured by cobalt metal), and is advancing the second phase of the construction project of lithium cathode materials with an annual output of 3000 tons (measured by cobalt metal). Lithium equipment business (Dongguan Derry) achieved a net profit of about 33.4349 million yuan in 2016, and the project of 3 million sets / year of electronic schoolbags is progressing steadily. Regardless of whether the mine resumes production or not, we believe that the company is expected to see a substantial increase in performance in the next 2-3 years.
Maintain the "overweight" rating
Assuming that the output of lithium concentrate is 0,0.77 and 30600 tons respectively, the output of lithium salt is 0, 1100 and 3300 tons respectively, and the output of electronic schoolbags is 1, 10 and 200000 respectively, it is estimated that the net profit of returning to the mother in 17-19 is 0.04,1.43 and 341 million yuan respectively, and the corresponding EPS is 0.02,0.55,1.31 yuan. The standard Tianqi lithium industry uses the market value of tons of reserves to give the company a certain risk discount to get a reasonable market value of 130.32-14.118 billion yuan for the upstream lithium business of the company. Lithium power equipment business is expected to have a 17-year net equity profit of 16.25 million yuan. Given 35 times PE, the reasonable market value of the business is 570 million yuan. The combined reasonable market value range of the two businesses is 13601-14.687 billion yuan, and the corresponding target price range is 52.38-56.56 yuan. Maintain the "overweight" rating.
Risk tips: lithium mine resumption progress is not as expected, electronic schoolbag business capacity release is not as expected, lithium equipment business promotion is not as expected.