Overview of events
On October 28, 2022, the company released a third-quarter report that the company realized operating income of 4.622 billion yuan in the first three quarters, an increase of 127.71% over the same period last year, and a net profit of 1.96 billion yuan, an increase of 685.72% over the same period last year. In the third quarter, the company achieved an operating income of 1.911 billion yuan, an increase of 187.52% over the same period last year, and a net profit of 612 million yuan, an increase of 798.08% over the same period last year.
Analysis and judgment:
The first three quarters of performance growth, Q3 lithium salt price elasticity weakening quarter-on-quarter profit decline.
In the first three quarters of 2022, the company achieved a total net profit of 1.96 billion yuan, an increase of 685.72% over the same period last year. Q3 achieved a net profit of 612 million yuan, with a month-on-month comparison of-10.29%. According to SMM data, the average tax price of Q2 lithium carbonate was 471600 yuan / ton, an increase of 11.64% month on month, the average tax price of Q3 lithium carbonate was 482,000yuan / ton, and an increase of 2.35%. It is obvious that the price elasticity of Q3 lithium carbonate is weakening. We judge that in the context of the limited month-on-month increase in lithium salt prices, part of the company's capacity to produce lithium carbonate for purchased raw materials, finishing profits are low, resulting in a decline in Q3 performance compared with Q2. The company announced on July 15 that the transformation of lithium mica compatibility between the two production lines for preparing lithium carbonate from spodumene (with a total capacity of 15000 tons) has been completed. at present, both spodumene and lithium mica can be used as raw materials to prepare lithium salt, which improves the flexibility of purchasing raw materials and fully ensures the supply of raw materials. Looking forward to Q4, the company's own mining part of lithium carbonate production is expected to increase month-on-month, superimposed Q4 lithium carbonate price increase again, Q4 single-quarter performance is expected to improve month-on-month.
Join hands with Fulin Seiko to build 20,000 tons of lithium salt production and marketing, and jointly develop new profit growth points of lithium dihydrogen phosphate.
On October 28, the company announced that it had signed a strategic cooperation agreement with Fulin Seiko and carried out cooperation around business and equity. The company announced on April 8 that it will invest in a new 3 million-ton lithium mining project with an annual output of 20,000 tons in Tongan and Industrial Park, Yifeng County, Jiangxi Province, with a total investment of about 2 billion yuan. According to the plan and announcement, the investment of the lithium salt project company with an annual output of 20,000 tons may be built in the form of joint ventures such as downstream head customers and strategic investors. Based on the above situation, the company decided to introduce Fulin Seiko as a strategic partner first. Fulin Seiko participated in 10% of the shares and jointly invested in a new 20,000 ton / year lithium salt project. The lithium carbonate produced by the 20,000 ton lithium salt project is given priority to supply Fulin Seiko according to 50% of the output (if the output of Jiangte lithium salt is allowed, in principle, no less than 10,000 tons / year). In the follow-up, according to the needs of the project and development, it is not ruled out to continue to introduce powerful downstream head customers and strategic investors. In addition, according to the company announcement, the company and Fulin Seiko, with a joint venture company as the main body, built a new lithium salt project with an annual output of not less than 50,000 tons, with a total investment of about 500 million yuan. Fulin Seiko holds 51%, and the company holds 49%. According to the contents of the announcement, the 50,000-ton new lithium salt project or lithium sulfate to produce lithium dihydrogen phosphate production line. The signing of the Strategic Cooperation Agreement with Fulin Seiko will help the company to further enhance its stickiness with downstream high-quality customers and optimize the medium-and long-term customer structure. At the same time, the company will take this opportunity to further improve the layout of the industrial chain, expand the applicable areas of products, and add new profit growth points.
Sign a strategic agreement with Yichun municipal government to ensure the supply of raw materials.
On October 28, the company announced that it had signed a strategic cooperation framework agreement with the people's Government of Yichun City and Fulin Seiko. According to the announcement, Jiangxi sublimation, a subsidiary of Fulin Seiko, signed a cooperation framework agreement with the management committee of Yichun Economic and technological Development Zone on February 25, 2022 to invest in a new high-pressure solid density lithium iron phosphate cathode material project. the total investment is expected to be about 5 billion yuan, which will be built in two phases. Jiangte Mining, a wholly owned subsidiary of the company, plans to invest in a new project of 3 million tons of lithium ore mining and an annual output of 20,000 tons of lithium salt, with a total investment of about 2 billion yuan. According to the above, the company and Fulin Seiko plan to invest a total of 7 billion yuan to build a new lithium salt and lithium-ion battery project in Yichun by stages. After signing the cooperation framework, the Yichun municipal government will support speeding up the exploration and mining of the exploration rights owned by Jiangte Motor and the landing of the lithium salt project, and for the lithium resource gap in the operation of Jiangte Motor and Fulin Seiko projects, it will be coordinated by the municipal mining company in a certain way, which will have a positive impact on the joint venture projects and future development of Jiangte Motor and Fulin Seiko. With the support of Yichun municipal government, it is believed that the company's lithium resources project is expected to fall to the ground, ensuring the raw material supply of the company's lithium resources in the future.
Investment suggestion
At present, the company is mainly two-wheel drive of lithium and motor plates. On the basis of the existing motor business, the company is rapidly expanding lithium plate business and building an integrated industry chain of mining, mineral processing and deep processing. At this point, the company introduces enterprises in the middle reaches of the industrial chain to jointly develop and build lithium salt projects, on the one hand, it can deeply bind downstream customers and strengthen cooperation; on the other hand, it will help to speed up the development and construction of lithium salt projects. promote lithium salt business to release profits as soon as possible. At present, the company has 1.2 million tons / year lithium mica mineral processing capacity, 15,000 tons / year lithium mica preparation lithium salt production capacity and 15,000 tons / year lithium mica and spodumene compatible lithium salt production capacity of 30,000 tons / year. With the subsequent construction of 15000 tons of lithium salt project, as well as 3 million tons of mining and separation integration and 20, 000 tons of lithium salt project put into production Lithium plate performance growth is expected to lead to a big increase in the company's overall performance. Considering that the guarantee rate of the company's own mine is insufficient this year and is expected to start to increase in 2023, we downgrade the performance in 2022 and raise the performance forecasts for 2023 and 2024. The operating income of the company in 2022-2024 increased from 74.84 billion yuan to 63.85 billion yuan, respectively, to 107.89 billion yuan, an increase of 114.1%, 69.0%, 29.4% respectively. The homing net profit increased by 720.7%, 84%, 27.4%, and increased by 720.7%, 27.4% and 4.35 yuan per share, respectively, corresponding to the closing price of RMB 19.36 on October 27, 2022, and PE was as much as 10-6-4. Maintain a "buy" rating.
Risk hint
1) the price of lithium salt fluctuates sharply
2) the production capacity construction of mining and selection and the transformation and construction of lithium salt production line are not as expected; 3) the exploration and conversion of Xikeng is not as expected.
4) the construction of joint venture projects is not as expected.
5) the resource guarantee of the company is not as good as expected in Yichun.