Event
Xiangtan Dianhua announces its results for the first half of 2020
Xiangtan Electric and Chemical Co., Ltd. released its semi-annual report for 2020. During the reporting period, the company realized operating income of 552 million yuan, down 5.68% from the same period last year; the net profit belonging to shareholders of listed companies was 16.4 million yuan, down 68.27% from the same period last year; and the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 15.6 million yuan, down 69.77% from the same period last year.
During the reporting period, the company's operating costs, sales expenses, and management expenses decreased slightly compared with the same period last year, while financial expenses increased by 28.07%; R & D investment increased by 69.07%; and the amount of cash flow generated by operating activities decreased slightly.
Brief comment
The company's main business includes battery material business and sewage treatment business. Battery material business covers electrolytic manganese dioxide, lithium manganate, manganese sulfate and other manganese electrode / manganese salt products, and through the holding of Hunan Yuneng cut into the field of lithium iron phosphate and ternary cathode. The company has won a number of national and provincial honorary titles.
Battery material business part of the pressure
During the reporting period, the company's battery materials business achieved revenue of 436 million yuan, a slight decrease of 6.61% compared with the same period last year. The market of electrolytic manganese dioxide is stable, and the company has achieved sales of 37100 tons, unchanged from the same period last year. The demand for relatively low-cost lithium manganate positive electrodes for two-wheeled electric vehicles has increased rapidly, and the company has achieved sales of 8500 tons, an increase of 32.77% over the same period last year. High-purity manganese sulfate, affected by the shrinking production and sales scale of new energy vehicles and the relatively low demand for ternary batteries in the first half of the year, both sales and prices declined, with sales down 81.01% and prices down 23.02% compared with the same period last year.
Sewage treatment business maintains steady growth
During the reporting period, the company's sewage treatment plant totaled 47.2 million tons, up 2.8 percent over the same period last year; realized revenue of 63.5 million yuan, up 8.03 percent over the same period last year; and realized net profit of 26.9 million yuan, up 23.21 percent over the same period last year.
Foreign investment and equity participation companies have made positive progress.
During the reporting period, the company raised 527 million yuan through a non-public offering of shares, including 363 million yuan for Jingxi Electric, a wholly owned subsidiary, and 10 million yuan for the participating company, Lihe Houpu.
During the reporting period, the company's shareholding company, Yuneng New Energy, set up a wholly-owned subsidiary Sichuan Horeng, and built a new production line with an annual output of 20,000 tons of lithium iron phosphate, which is expected to enter the trial operation stage at the beginning of September 2020. The total annual production capacity of lithium iron phosphate of Yuneng New Energy will reach 50-60,000 tons. The annual production capacity of Ni-Co-mn ternary battery material is 5000 tons. At present, Ni-Co-mn ternary battery material products are actively in the process of key customer certification.
Iron lithium positive and ternary positive benefit to varying degrees from the recovery of the new energy vehicle industry, and the company's fundamentals are expected to improve significantly in the second half of the year. In July 2020, the growth rate of production and sales of China's new energy vehicle industry has picked up significantly compared with the same period last year. In the same period, the production and sales of new energy vehicles in Europe maintained a high growth rate compared with the same period last year, and the fundamental inflection point of new energy vehicles arrived as scheduled.
China is the region with the most practical experience of lithium iron phosphate passenger cars in the world. In the second half of 2020, a large number of models using lithium iron phosphate batteries, such as Tesla, Inc. model 3 standard continued version, BYD Han EV, Song plus EV and other models are expected to actively contribute to sales. SAIC, BAIC, Great Wall and other car companies also have lithium iron phosphate models into the recommended catalogue. Combined with the gradual recognition of lithium iron phosphate battery in the global new energy vehicle market, the gradual establishment of business model and scale growth of energy storage battery, we estimate that the production and sales of lithium iron phosphate battery in China is expected to enter the track of substantial growth. As one of the leaders in the industry, the company's equity participation in Yuneng New Energy is expected to benefit deeply.
The high growth rate of the new energy vehicle industry has warmed up the demand for ternary batteries, which are still dominant in comprehensive performance, and the company's ternary cathode, high-purity manganese sulfate and other businesses are also expected to benefit to a considerable extent.
Investment advice:
It is estimated that the company's net profit from 2020 to 2021 will be 1.01 yuan and 202 million yuan, an increase of 48% and 50% over the same period last year. Maintain the company's overweight rating with a 6-month target price of 9.79 yuan.
Risk Tips:
The competition in the manganese battery industry intensified; the production and sales of new energy vehicles in China fell short of expectations; the development of lithium iron phosphate models and the rhythm and sales of new products on the market were not as expected; and the price reduction pressure of lithium iron phosphate power battery was higher than expected.