Results for the first three quarters of 2020 are in line with our expectations
The company announced its results for the first three quarters of 2020: revenue of 21.18 billion yuan, down 29.0% from the same period last year; net profit of 590 million yuan, corresponding to 0.38 yuan per share, down 22.7% from the same period last year.
3Q20 revenue was 8.61 billion yuan, down 27.8% from the same period last year, up 31.3% from the previous year; net profit from the home was 270 million yuan, corresponding to 0.17 yuan per share, down 13.9% from the same period last year, up 60.7% from the previous year; and gross profit margin increased by 2.5ppt to 17.5% from the previous month.
Trend of development
The installed capacity and scheduling of power batteries continue to increase significantly to boost the demand for electrolytes. According to statistics from the China Automobile Association and Xin spinulosa, monthly power batteries were installed with 5.1max 8.6 Gwh in 7-8-9, up 6%, 49%, 13% and 6%, 3%, 16%, respectively, and the demand rebounded quickly; it is expected that the output of major power battery enterprises will be + 15% in October; the production of four major battery materials will increase synchronously, and the output of major electrolyte enterprises will increase by + 13%, leading to a substantial increase in electrolyte demand. At present, the domestic electrolyte production capacity is 385,000 tons / year, and the sales volume from August to September is 24,28,000 tons, with an operating rate of about 87 percent. As of October 23, the price of electrolyte (lithium iron phosphate) was 40,000 yuan / ton, a monthly increase of 15.9%. Looking forward to the fourth quarter, we are optimistic that the sales of new energy vehicles will continue to grow, the price of superimposed raw materials downstream will rise, and the price of electrolyte is expected to continue to rise. In the medium and long term, due to the trough of the new energy vehicle industry in 2017-2019, the electrolyte leader expands its market share by relying on cost and scale advantages. The combined market share of the top three suppliers, such as Tianji, New Zebang and Cathay Pacific, is more than 60%. We expect that the industry pattern of the electrolyte industry chain will remain stable in the future, and the profitability of the electrolyte will continue to be repaired.
Textile and clothing exports have warmed up, accelerating the shift to the integration of the world supply chain. In September, textile, yarn, clothing and other exports totaled 196.79 billion yuan, + 17.2% compared with the same period last year. Month-on-month exports totaled 1.51567 trillion yuan from January to September, + 12.3% from the same period last year. Mainly due to the epidemic in India and other places, textile orders were transferred to China, and trade business picked up. In addition, in the future, the company will accelerate overseas layout, Myanmar clothing industry base and other projects continue to promote.
Ruitai New Energy, a subsidiary, is to be spun off and listed, focusing on the new materials business of lithium electricity. In April, the company issued an announcement to spin off its subsidiary Ruitai New Energy to the growth Enterprise Market, focusing on new chemical materials and new energy business. Ruitai New Energy 1H20, a subsidiary that mainly produces lithium-ion battery electrolytes and silane coupling agents, had revenue of 600 million yuan, down 16.1% from the same period last year, while Chaowei New Materials, a subsidiary that mainly produces electronic chemicals, had revenue of 70 million yuan, up 5.4% from the same period last year.
Profit forecast and valuation
Keep profit forecasts for 2020 and 2021 unchanged. The current share price corresponds to 12.4 times 2020 / 2021 / 10.4 times earnings. Maintain an outperform industry rating and a target price of 8.00 yuan, corresponding to 15.5 times 2020 price-to-earnings ratio and 13.0 times 2021 price-to-earnings ratio, which has 25.0% upward space compared with the current stock price.
Risk.
Sales of new energy vehicles are not as expected and textile exports are not smooth.