Event
On June 30, 2023, the company issued an announcement on the signing of an investment cooperation agreement. The company jointly funded a joint venture with Jiangsu Yaoning New Energy Co., Ltd. and Shanghai Tianqian Consulting and Management Partnership to invest in the construction of a waste lithium recycling production line of 10,000 tons per year, with a construction period from July 2023 to July 2024. after the completion and operation of the first phase of the project, if the project company is unable to meet the lithium battery treatment needs of B, C and their related parties. Construction in the later stage: the recycling capacity of waste lithium batteries in the second phase of the project will increase by 40,000 tons per year. The recycling capacity of waste lithium batteries in the third phase of the project will be increased by 50,000 tons per year, and the second and third phases will be completed before December 2026.
Business analysis
Lithium recycling market is broad, the company formally cut in through the establishment of joint ventures, capacity construction is advancing rapidly. With the gradual maturity of the power battery industry chain, the lithium recycling market has entered a period of growth. It is estimated in the "Lithium Recycling Industry Analysis" that the global lithium recycling market will grow at a compound growth rate of more than 80 per cent from 2021 to 2025, and the market size of metal lithium recycling in power batteries will be about 36.5 billion yuan in 2025. The related business involved in the company in the past is mainly extraction lithium extraction services, and there is a certain degree of cooperation with lithium battery recycling in terms of process technology. This time, through equity participation in the joint venture company, the registered capital of the joint venture company is 10 million yuan. The company's shareholding ratio is 51%, and the production capacity construction plan is relatively clear. The recycling capacity of 10,000 tons of waste batteries in the first phase is expected to be put into operation in the second half of next year.
The company has technical advantages to build channel barriers through cooperation downstream. In recent years, by constantly optimizing the extraction technology of lithium, the company has improved the overall recovery rate of lithium, relying on technical advantages to quickly seize the opportunity. This time the partner Jiangsu Yaoning New Energy belongs to the new energy enterprise module of Yaoning Technology Group, while Yaoning Technology is born in the spare parts business center of Geely Automobile Group. The landing of this investment cooperation symbolizes the company's breakthrough from 0 to 1 in the field of lithium battery recycling. In the future, while giving full play to its own technological advantages, the company will be able to make use of the resource advantages of partners in the lithium resource recycling industry to jointly promote the orderly development of lithium battery recycling projects and further develop the market of lithium battery recycling industry, so as to open up its own secondary growth.
Earnings forecast, valuation and rating
The company is a leading domestic low-carbon aliphatic amine enterprise, the flavor and flavor business is bound to overseas giants, the performance stability of the main business is relatively good, and the long-term growth of lithium recycling business plate is expected.
We expect the company's 2023-2025 net profit to be 319 million yuan, 396 million yuan and 459 million yuan respectively, and the current market capitalization corresponds to a PE valuation of 23.56, 18.97, 16.39 times, maintaining a "buy" rating.
Risk hint
The release of new production capacity is not as expected; the price of raw materials fluctuates sharply; the lithium extraction order is not as expected; the ban on restricted shares is lifted; the RMB exchange rate fluctuates.