Company profile: the company is a national high-tech enterprise integrating R & D, production and sales of special motors and lithium new energy products. After years of development, the company has formed a pattern of motor, lithium electricity and automobile troika.
We expect that the company's lithium carbonate business will grow substantially in 2018, the motor business will make steady progress, the automobile business structure will be transformed, and the company's industrial chain will enjoy the industry dividend.
Lithium salt: lithium mica + spodumene goes hand in hand, lithium industry is about to release lithium mica: with the smooth commissioning of the first phase of 600000 tons of lithium ceramic stone project in Yifeng mining area, the company is expected to mine 1.2 million tons of lithium mica in 2018 (600,000 tons / year in Taichang and 600,000 tons / year in Yifeng). The sufficient supply of raw materials in the upstream ensures the orderly release of lithium salt production line in the middle reaches. We estimate that the raw material self-sufficiency rate of 15000 tons of mica to lithium carbonate production line is more than 60%. Spodumene ore: the Bard mine in Western Australia has been put into production. The designed lithium concentrate has an annual production capacity of 160000 tons and a grade of 6%, equivalent to 20, 000 tons of lithium carbonate equivalent. According to the underwriting agreement, it will provide 80, 000 tons / year spodumene concentrate to the subsidiary Baojiang lithium industry below the market price. We expect the production line of 15000 tons of spodumene to extract lithium, with a self-sufficiency rate close to 100%. Lithium extraction from lithium mica: (1) with the completion of the second technical transformation in September 2017, the company's production capacity of lithium carbonate from mica has reached 5000 tons, which has basically reached full production at present. (2) in August 2017, the company started construction of a 10,000-ton lithium carbonate production line for the preparation of lithium mica, which is expected to be completed in July 2018. At that time, the total production capacity of lithium carbonate prepared by mica will reach 15000 tons. Lithium extraction from spodumene: as of late May, the lithium salt production capacity of subsidiary Baojiang Lithium Industry is under orderly construction and is expected to be completed in July 2018. At that time, the company's lithium salt production capacity of spodumene will reach 15000 tons (10,000 tons of battery-grade lithium carbonate and 5000 tons of lithium hydroxide), and the equity production capacity will be 7500 tons (5000 tons of lithium carbonate and 2500 tons of lithium hydroxide). Conclusion: the output of lithium salt of the company can be increased orderly in 2018, and the performance of the plate increases greatly. The annual revenue is expected to reach 2.479 billion yuan and the gross profit is 1.224 billion yuan.
Motor: steady growth in business, upgrading of the new motor industry. In 2017, the company's motor sector performance grew steadily, with revenue of 1.044 billion yuan, an increase of 40.25% over the same period last year. In 2015, the company directed the acquisition of MIG Motor, expanding the field of servo motors. In 17 years, MIG achieved revenue of 478 million yuan, net profit of 83.61 million yuan and performance commitment of 116.13%. While maintaining the leading position of traditional motors, the company focuses on developing new motors such as servos and new energy vehicles to help upgrade the industry.
Automobiles: optimize the production and marketing structure and actively respond to the policy of subsidies for new energy vehicles Kowloon Motor Company has actively responded to the policy of subsidy for new energy vehicles by optimizing and adjusting the production and marketing structure and laying out overseas markets. According to the quarterly report, the company sold 214new energy vehicles, achieving sales revenue of 94.2702 million yuan, a rapid increase over the same period last year.
Profit forecast rating:
Based on (1) the product volume of the company is fast, and the certainty of performance growth is high. (2) according to the announcement, the company's performance in the first quarter of 18 years greatly exceeded expectations, with a net profit of 198 million yuan, an increase of 320% over the same period last year. We maintain a 18-year valuation of 26 times PE (industry average PE is 26 times) with a target price of $14.82 and a "buy" rating of $0.57, 0.65, respectively, in 2020.
Risk hint: lithium price drop, lithium carbonate production release is lower than expected