Main points of investment
The profit of photovoltaic operation increased, and the annual performance exceeded expectations.
In 2017, the company achieved a return profit of 153 million, an increase of 32.6% over the same period last year, slightly exceeding the upper limit of Q3 forecast, mainly due to the outstanding contribution of the company's photovoltaic operation business Q4. At present, the scale of the photovoltaic power station under construction is 425MW, and the growing business volume of the power station will provide the company with stable cash flow in the future. Benefiting from the good profitability of the power plant business, the company reported gross profit margin and net interest rate increased by 5.46pct and 1.71pct respectively in the three quarters of 2017 compared with the same period last year.
The performance in 2017 is up to standard, and Shanghai China Lithium will be officially listed.
Based on being optimistic about the upstream deep processing of lithium power, the company bought 20% of Shanghai Zhongli with 125 million cash in October 2017. after a preliminary audit, Shanghai Zhongli reached the agreement of 30 million in 2017. therefore, the company plans to invest 500 million to complete the full acquisition of its remaining equity, which is expected to be formally merged after the completion of the acquisition. Shanghai Zhongli focuses on the production and sales of battery-grade lithium carbonate, lithium hydroxide and lithium hydroxide. With the national standards of Tianqi Lithium Industry and Ganfeng Lithium Lithium Dihydrogen Phosphate, the promised net profit from 2018 to 2019 is 60 million and 93.75 million respectively.
Deep layout of the upstream of lithium electricity, lithium extraction from salt lake is ready to go.
Last year, the company successively acquired Qinghai Jintai, a lithium material company (16.7%), and jointly established Zhaofeng lithium industry (51%) with Ganfeng Lithium. The former owns the total 473Km of Balenmahai Salt Lake in Qinghai Province. Mining exploration rights, mainly for centrifugal extraction of lithium chloride solution, industrial-grade lithium carbonate production and sales; the latter positioning 7000 tons of battery-grade lithium carbonate production line and 10000 tons of anhydrous lithium chloride production line, the products will be underwritten by Ganfeng Lithium. The two companies and Shanghai Zhongli are the upper and lower reaches of the industrial chain, and good industrial coordination is expected to be formed in the future.
Profit forecast and valuation
Assuming that the performance commitments of Shanghai Zhongli and Qinghai Jintai are completed, combined with the profit calculation of Zhaofeng Lithium Industry, we estimate that the company's corresponding EPS in 2017-2019 will be 0.06,0.15,0.30 yuan respectively, corresponding to 52.6,28.0,14.2 times PE, maintaining the buy rating.
Risk hint: the progress of lithium extraction from salt lake is lower than expected, and the price of lithium salt falls rapidly.
