Core views:
incident. The company published its 2020 semi-annual report. During the reporting period, the company achieved operating income of 455,3522 million yuan, a year-on-year decrease of 48.51%; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 125,3208 million yuan, a decrease of 558.83% over the same period last year. At the end of the reporting period, the company's total assets were 4.752 billion yuan, an increase of 2.82% over the end of the previous year; net assets attributable to shareholders of listed companies were 1,895 million yuan, a decrease of 5.42% over the end of the previous year.
The pandemic affected performance and will improve in the second half of the year. Due to the recurrence of the novel coronavirus pneumonia epidemic, the development of the company's supply chain procurement and logistics and transportation activities were greatly affected. Order delivery and acceptance were delayed, causing the company's profit to fluctuate in the first half of the year. It is expected that profits will rise in the second half of the year as demand recovers.
The lithium battery materials business, focusing on customer needs and speeding up the release of new production capacity, is expected to increase profits. The dynamic high-pressure solid iron phosphate products independently developed by the subsidiary Yacheng, Hunan, have excellent performance. At present, fully automated production of 20,000 tons of iron phosphate has entered the batch supply stage. In the first half of the year, iron phosphate shipments increased 11.5% year-on-year, and single-quarter iron phosphate shipments increased more than three-fold year-on-year in the second quarter.
Optimize production capacity layout and strengthen strategic cooperation. In November-December 2019, Hunan Yacheng and Peking University first signed strategic procurement agreements for 693,000 tons of iron phosphate and 18,700 tons of cobalt tetroxide for the year 2020-2022, laying a solid foundation for sales of their main products.
The power business expands sales channels and speeds up order recovery. The annual investment of the State Grid increased by 10.3%. In the second quarter, the operating income of the power sector in a single quarter recovered to 60% in the same period of the previous year. The month-on-month growth improved sharply, and on-hand orders basically returned to the same period last year.
Profit forecasts and investment recommendations. The company's EPS for 2020-2022 is expected to be 0.08, 0.23, and 0.37 yuan/share, respectively. The company's lithium battery materials business focuses on customer needs and accelerates the release of new production capacity. It is expected to increase profits, expand sales channels in the power business, and speed up order recovery. Referring to comparable company valuations, we gave the company a reasonable value of 9.93 yuan/share of PB of 4 times that of 2020, and gave the company a “buy” rating.
Risk warning. New construction projects are being put into operation slowly; profit and loss from changes in fair value have an impact on performance.