Core views:
Net profit for 23Q2 fell 68.1% month-on-month, and the performance was in line with expectations. According to the company's semi-annual report, 23H1 achieved net profit of 611 million yuan, down 79.8% year on year. Among them, Zhiyuan Lithium and Shengtun Lithium 23H1 achieved net profit of 300 million yuan and 150 million yuan respectively; Q2 achieved revenue of 1,974 million yuan, down 42.7% year on year, down 29.1% month on year; realized net profit of 148 million yuan, down 92.4% year on year, down 68.1% month on year; net cash flow from operating activities was 1.03 billion yuan, same A year-on-year increase of 50.4% and a month-on-month increase of 75.3%; the balance ratio was 35.4%, a month-on-month increase of 2.15 PCT, an increase of 5.88PCT over the beginning of the year, and the overall performance of the company was in line with expectations.
The production and construction of overseas lithium resources is progressing steadily, and we look forward to exploration and mining by Huirong Mining. According to the company's semi-annual report, the company's Sabixing lithium mine in Zimbabwe has entered trial production in May of this year, and the production capacity has climbed well. Up to now, it has produced more than 20,000 tons of lithium concentrate. After full production, the mine is expected to produce 30,000 tons of LCE per year; Pocitos Salt Lake will begin construction of a lithium chloride crystal pilot production line with an annual output of 2,000 tons of LCE; Sichuan Yajiang Huirong Mining, with 41.2% of the company's shares, is a large-scale lithium mine with a resource size of one million tons of LCE in China. We look forward to the smooth progress of the transfer of prospecting rights to mining rights.
Profit forecasts and investment recommendations. It is estimated that the company's EPS for 23-25 will be 2.26/2.55/2.81 yuan/share, respectively, and the PE corresponding to the latest closing price will be 13.9/12.3/11.2 times, respectively. Since the second half of last year, the in-depth adjustment of the company's stock price has fully reflected the market's expectations of falling lithium carbonate prices. Downstream power batteries and energy storage batteries are resilient in demand, new upstream production releases strong uncertainty, and lithium prices may be running at a high level in the short term. Expected improvements will bring the company an opportunity for valuation repair. Considering the company's growth potential, we think it is reasonable to give the company a PE valuation of 23 times 15 times. The corresponding reasonable value of the company is 33.83 yuan/share, giving the company a “buy” rating.
Risk warning. Sales volume of new energy vehicles, power batteries and energy storage batteries falling short of expectations poses a risk of falling lithium prices; development, operation and cost control risks of overseas projects; and risk of exchange rate fluctuations.