Lithium salt business will bring performance growth. The company has made great efforts to develop lithium new energy business in recent years, and now it has lithium resources and lithium salt processing, cathode materials and ternary precursors, motors, new energy vehicles and other businesses, involving the upstream, middle and lower reaches of new energy vehicles, the industrial chain is relatively complete. It is estimated that by the end of 2018, the company is expected to form a lithium carbonate production capacity of 30,000 tons (equity capacity of 22500 tons). The company also has 5 mining rights and 8 exploration rights, with long-term resources of more than 100 million tons. According to the estimated cost and profit of the company, the gross profit of the company's lithium salt business is expected to reach more than 1.4 billion yuan after all lithium industry projects reach production.

The cost advantage of extracting lithium from lepidolite is obvious. The company's 5000-ton mica lithium extraction production line is about to be put into production, which adopts a similar roasting process to lithium extraction from spodumene, and the realization of continuous production is a high probability event. At present, the price of mica is much lower than that of spodumene concentrate, and the cost of producing lithium carbonate is expected to be controlled at about 70,000 yuan. The company's Shiziling Mine is expected to be put into production in March 18, and if the resources are self-sufficient, the cost of lithium carbonate is expected to be reduced to 40-50, 000 yuan. According to the current price estimates, after all the 15000 tons of production lines reach production, it is expected to bring a gross profit of 10-1.35 billion yuan to the company.

Join hands with Baowei to realize lithium extraction from spodumene. A wholly owned subsidiary of the company formed a joint venture subsidiary with Baowei Materials, each holding 50% of the shares. After the completion of the joint venture project, the production and marketing scale of lithium products such as lithium carbonate and lithium hydroxide will reach 15000 tons. Baowei Materials has the right to sell lithium ore in Siobal Mountain and LaCorne in Canada, with an annual supply of 16-200000 tons of lithium concentrate, which effectively ensures the lithium resources of the joint venture company. According to the current agreement price, the cost of extracting lithium from spodumene is about 81000 yuan. At the current lithium price of 150,000 yuan / ton, 15000 tons of lithium salt is expected to bring a gross profit of nearly 880 million yuan to the joint venture company.

Motor and new energy vehicle business continue to develop. The motor industry is the company's traditional leading industry, and the business income accounts for about 30% of the main business income. MIG Motor, which the company acquired in 15 years, is the largest servo motor manufacturer in China, with a 17-year commitment profit of 75 million yuan. It has achieved 45.9 million net profit in the first half of the year, and the annual profit is expected to reach 100 million yuan. The company currently has three electric vehicle platforms: Kowloon, Yichun bus Factory and Jiangte Electric vehicle. Among them, Kowloon Motor bus is the leader in the field of commercial vehicles, signing orders of about 4 billion yuan in the first half of the year. With the implementation of the new energy policy and the delivery of major contracts, the company's new energy vehicle business is expected to continue to develop. In addition, the company also has a production capacity of 2400 tons of cathode materials and 3000 tons of cathode precursors, and has realized the industrialization of lithium-rich manganese-based cathode materials and has a relatively complete lithium electricity new energy industry chain.

Profit forecast and rating. We predict that the EPS of the company from 2017 to 2019 is 0.38,0.54 and 0.79 yuan, respectively, corresponding to the closing price of 16.80 yuan on September 11, and the dynamic Pamp E of the company is 43 times, 31 times and 21 times respectively. The company's mica lithium extraction is about to be produced, and all lithium salt projects are expected to bring a gross profit of more than 1.4 billion to the company. So maintain the company's "buy" rating.

Risk hint: the progress of the lithium salt project is not as expected, the output of lithium extraction from mica is not as expected, and the sales of new energy vehicles are declining.