Main points of investment:
The company is a leading supplier of lithium anode materials in China. The company is mainly engaged in the research and development, production and sales of lithium battery anode materials, the main products are divided into natural graphite and artificial graphite, widely used in power, 3C consumer electronics and industrial energy storage and other lithium battery fields. Benefiting from the growth of demand in the new energy vehicle industry, the company's operating scale is growing rapidly year by year. From 2015 to 2019, the company's operating income continued to grow from 130 million yuan to 646 million yuan, with a four-year CAGR of 49.24%, a net profit of 7.32 million yuan to 61.69 million yuan, and a four-year CAGR of 70.38%. In the first three quarters of 2020, the company achieved operating income of 331 million yuan, down 25.48% from the same period last year, and net profit of 40 million yuan, down 17.51% from the same period last year.
Artificial graphite is the mainstream anode material, and the market space will exceed 38 billion yuan in the next 3 years. With the strong demand of new energy vehicles, the demand for power batteries in China continues to grow, driving the shipment of negative materials continues to increase. With the increasing requirements of the market for battery performance, artificial graphite has gradually become the mainstream anode material because of its excellent performance, and there is a broad market space in the future. It is estimated that from 2020 to 2022, the demand for artificial graphite in China will be 212000 tons, 275000 tons and 322000 tons respectively, and the corresponding market space will be 10.1 billion yuan, 13.1 billion yuan and 15.3 billion yuan respectively.
Based on the domestic and international, the customer structure is constantly optimized. By the end of 2019, the company has entered five of the top 10 power lithium manufacturers in China, and the domestic shipment ranks sixth. As the main supplier of BYD, the company cooperates deeply with BYD to continuously match the downstream demand and strengthen the competitive advantage of products. The company began to supply LG Chemical in bulk at the end of 2019, and LG Chemical became the company's largest customer in the first half of 2020.
Profit forecast and rating: the company is an excellent supplier of negative materials in China, successfully cutting into the supply chain of first-line battery manufacturers. We estimate that the return net profit of the company in 20-22 is 0.72,1.52 and 260 million yuan respectively, and the corresponding EPS in 20-22 years is 0.72,1.52 and 2.60 yuan per share respectively, and the current stock price corresponds to 86 times, 41 times and 24 times of PE respectively. We select Pu Tailai, Cedar shares, Rongbai Technology and German Nano of the new energy vehicle industry chain as comparable companies, with an industry average PE of 51 times in 2021. Taking into account the growth of the company's performance and the margin of safety, we give the company an average industry valuation of 51 times in 2021, with 24% room for the stock price to rise. Cover for the first time, giving a "buy" rating.
Risk tips: global sales of new energy vehicles are not up to expectations; new capacity is not up to expectations; risk of new technology and new product development.