2021 performance is in line with our expectations

The company announced its 2021 results: revenue of 644 million yuan, year-on-year + 68.2% of the company's 2021 net profit of 140 million yuan, to achieve a turnaround into profits, in line with our expectations.

First, after the technical transformation of the first phase of the Zabuye Salt Lake project, the capacity utilization rate has increased significantly, and the company has increased the sales of lithium products. In 2021, the company promoted the Zabuye Salt Lake Phase I project to carry out salt field restoration, dynamic bittern exchange, three-dimensional crystallization and other process improvements, and the capacity utilization rate was greatly improved. in 2021, the company's lithium concentrate output reached 9016 tons, + 96.0% compared with the same period last year. In addition, thanks to the lithium demand warming company to increase the sales of lithium products, the company's lithium product sales reached 7866 tons in the whole year, + 964.2% last year.

Second, benefiting from the upward lithium price during the reporting period, the sales price of the company's lithium concentrate products has increased. The market price of lithium carbonate increased significantly during the reporting period. According to the Asian Metal Network, the average price of battery-grade lithium carbonate in 2021 was 120,000 yuan / ton, + 172% of the same period last year. The company's main lithium products are 50% grade lithium concentrate, and its actual sales price is adjusted with reference to the market price of lithium salt.

Third, the chromium mine business to achieve a simultaneous rise in volume and price. The market price of chromium ore rose sharply during the reporting period. according to Asia Metal net, the average price of China landed Chromium lump Ore (40%min) in 2021 was 48.3 yuan / tonnage, + 20.3% compared with the same period last year. The company's annual sales of chromium products were 149000 tons, + 35.57% compared with the same period last year.

Trend of development

The production capacity in 2025 is planned clearly, and the growth space of lithium business is opened up through endogenous growth and epitaxial expansion. The company's lithium business development plan is clear, and it is expected to achieve a lithium salt scale of 30,000 to 50,000 tons by the end of 2025.

On the one hand, the company accelerates the development of the Zabuye Salt Lake project, the production process of the first phase of the Zabuye project continues to be optimized, and the 10,000-ton battery-grade lithium carbonate project plans to produce 12000 tons of lithium carbonate, which is expected to be put into production in September 2023. In the future, the company plans to extend the layout of the lithium industry to high-end strategic products such as lithium hydroxide and lithium phosphate. On the other hand, the company plans to open up the expansion space of salt lake lithium extraction capacity through the integration of salt lake resources in the region, and lock in 1-2 resource targets in Tibet from 2023 to 2025.

The development of Luobusha chromite is accelerated and the mining capacity is expected to continue to expand. In 2016, the company injected 2.01 million tons of resources into the south of the Luobusa I and II ore group through a non-public offering. at present, the company is promoting the construction of the Luobusa southern project, and the company's chromite ore is expected to reach 260,000 tons per year after the completion of the expansion project.

Profit forecast and valuation

We keep our profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 50.0 / 19.2 times 2023. Maintain the outperform industry rating, but due to the downward shift of the market valuation center, we lowered our target price by 25.3% to 47.18 yuan, corresponding to 9.0 times 2025 price-to-earnings ratio, which has 40.0% upside space compared with the current stock price.

Risk

The construction of lithium carbonate project is lower than expected; the integration of salt lake in Tibet is lower than expected; the price of lithium is down.