Event: the company disclosed its annual report for 2022, with revenue of 3.302 billion yuan, year-on-year + 28.0%, net profit of 117 million yuan, + 87.6%, and non-net profit of 107 million yuan, + 162.4% over the same period last year.

The revenue / gross profit contribution of lithium materials business has increased significantly. 1) the revenue / gross profit ratio of lithium materials has reached nearly 40%: the company's lithium materials business capacity has been gradually released, and by the end of 2022, it has a production capacity of 41000 tons (an increase of 15000 tons over 2021). 26000 tons of production capacity (lithium ferromanganese phosphate and ferric phosphate) under construction, lithium electric materials business output of about 37000 tons in 2022, achieving revenue of 1.293 billion yuan, + 318.80% year-on-year, accounting for 39% of revenue The gross profit was 215 million yuan, + 527% over the same period last year, accounting for 43% of the gross profit. 2) PCB chemicals business is under pressure: capacity utilization of PCB chemicals fell slightly to 95.25% in 2022 (100% in 2021), revenue from-15% to 1.44 billion yuan, gross profit from-26% to 160 million yuan, gross profit margin from-1.62pct to 11.07%, or mainly affected by downstream prosperity. 3) the growth rate of chemical reagent business is remarkable: the capacity utilization rate of chemical reagent business reaches 100%, revenue / gross profit reaches RMB 118 million, year-on-year + 27.8% surplus 28.2%, gross profit 30.22%, year-on-year + 0.10pct.

The layout of lithium recycling industry continues to expand, and the advantage of technology + channel casts the company's core competitiveness. 1) steady expansion of capacity layout: in 2022, the company's 10,000 tons / year comprehensive recovery production line and 40,000 tons / year decommissioned lithium battery disassembly and classified utilization project officially landed. The company plans to raise 1.25 billion yuan in a non-public offering, and plans to build a comprehensive recovery production line of 50,000 tons of iron phosphate and 11500 tons of lithium carbonate, with a construction period of 18 months, and is expected to fully enjoy the industry dividend brought by the wave of battery decommissioning 2-3 years later. 2) the company's lithium battery recovery business technology is leading: the company provides decommissioned power battery life cycle solutions including "echelon utilization" and "recycling", which can extend battery life through core technologies such as active equalization. The recovery rate of lithium carbonate in the regeneration link is more than 95% (the national standard condition is not less than 85%), and the recovery rate of iron phosphate is more than 98%. 3) Channel advantages are further consolidated: the sources of raw materials for lithium recovery are scattered, and channel capacity is one of the core barriers in the recycling industry. In 2022, the company has successively established strategic cooperation relations with companies such as Olympic New Energy, Panasonic China and ground Railway. Four-party strategic cooperation agreements have been signed with Panasonic Siwei, Pacific Insurance and Sumitomo Mitsui, and the channel advantages have been continuously strengthened.

Profit forecast and investment advice: considering the continuous expansion of the company's recycling capacity of new energy materials and lithium electricity, the original chemical business is expected to grow steadily, and the company is expected to return to its parent net profit of 2.40 trillion yuan in 2023-2025, maintaining the "overweight" rating.

Risk tips: project schedule is not as expected, industry competition is deteriorating, product prices fluctuate greatly, and so on.