Core viewpoints

Cobalt price fluctuation + epidemic influence, the bottom of the performance is established. In 2019, the company achieved operating income of 1.714 billion yuan, an increase of 12.72% over the same period last year, and the net profit belonging to shareholders of listed companies was 13.5 million yuan, down 89.97% from the same period last year. The net profit after deducting non-recurring gains and losses belonging to shareholders of listed companies was-577500 yuan, down 100.49% from the same period last year. The net cash flow generated by operating activities was 57.69 million yuan, an increase of 215.95% over the same period last year. In 2019, the company's overall product sales were 78000 tons, mainly from lithium materials, while the decline in performance was mainly affected by a sharp drop in the prices of cobalt, nickel, lithium and other raw materials and related products.

Lithium materials business dragged down full-year results, and retired batteries began to increase. The revenue of lithium materials business was 240 million yuan, an increase of 19.81% over the same period last year, accounting for 14% of the revenue. During the reporting period, cobalt prices fell by more than 56% and lithium salts by more than 40%. The growth of the company's revenue scale was mainly driven by volume growth, and the scale of waste battery recycling gradually expanded. Affected by price fluctuations, the gross profit margin of lithium materials was only 3.16%, a year-on-year decline of 16.7 percentage points, which is the main reason for dragging down the company's performance. For this reason, the company estimates various impairment losses of more than 10 million. The echelon utilization of decommissioned batteries is a bright spot, starting in 2019 and achieving 2.97 million revenue during the reporting period. With the increase in the number of decommissioned batteries, it is expected to become a new performance growth point for the company.

Divest the loss-making assets and invest in the lithium recovery business. The company plans to sell 1 million tons of spodumene mineral processing project at 397 million yuan, and the funds will be used for the construction of power battery recycling project. Due to the continuous decline in lithium salt prices, spodumene mineral processing project losses and longer payback period, the company sold the project to speed up the recovery of funds, optimize the strategic layout, focus on the development of specialty chemicals and new energy materials business, and enhance the sustainable profitability of the enterprise.

Financial forecasts and investment suggestions

Due to the reduction of cobalt and lithium salt price data in the next three years and the shipment of lithium iron phosphate positive electrode, the superposition company sold the spodumene mineral processing project as a whole. We forecast that the company's revenue in 2020-2022 will be 22.12 million RMB 2707pm 3.482 billion yuan respectively (the original forecast value for 20-21 years is 2611338 million yuan). The homing net profit is 78 million yuan, 102 million yuan and 150 million yuan respectively (the original forecast value for 20-21 years is 1540.234 million yuan), and the corresponding eps is 0.2110.27cusp 0.40 yuan (the original forecast value for 20-21 years is 0.41 pound 0.63 yuan). According to the average valuation of 67 times of the comparable company in 2020, the company is given a price of 14.07 yuan to maintain the overweight rating.

Risk hint

The risk of large fluctuations in product prices; the risk of decline in demand for PCB electronic chemicals.