Thanks to prominent cost advantages, 2023Q3's performance rebounded month-on-month. In the future, the company will benefit from complete self-sufficiency in raw materials and gain cost advantages over peers. We adjusted the company's net profit forecast for 2023-2025 to 25.99/29.60/3.393 billion yuan. Referring to the current valuation of comparable companies, considering the company's future growth and strong cost advantage expectations, the company was given a PE valuation of 10 times in 2024, corresponding to the target price of 41 yuan, maintaining a “buy” rating.
Earnings continued to grow in the first three quarters of 2023, and 23Q3 performance rebounded month-on-month. In 23Q1-Q3, the company achieved revenue of 5.05 billion yuan, -8.81% year-on-year; net profit of 2.07 billion yuan, +0.92% year-on-year; net profit after deduction of 2,025 billion yuan, +1.32% year-on-year. In 2023Q3, the company achieved revenue and net profit of 1,404/568 million yuan respectively, or -32.44%/22.08%, respectively, and -8.23%/+39.64% month-on-month respectively. The company's 2023Q3 gross margin and net profit margin were 59.78%/40.39%, respectively, up 11.97/5.31pcts year on year.
The company's lithium mine project was put into full production, and the cost advantage was gradually highlighted. At the beginning of July 2023, the “Bikita Lithium Mine 2 million tons/year (lithium penetrating feldspar) renovation and expansion project” and the “Bikita Lithium Mine 2 million tons/year (spodumene) construction project” invested by the company were completed one after another and were officially put into trial production. Currently, the lithium-permeable feldspar concentrate and spodumene concentrate produced by the two mineral processing projects are continuously being delivered to the company's domestic lithium salt factory, marking that the company has officially entered the era of complete self-sufficiency of lithium mines, further enhancing the company's cost advantage, so in the context of the sharp drop in lithium prices in the third quarter, the company's gross margin And the net interest rate is still Year-over-year growth.
Company repurchases and management holdings increase reflect the company's and executives' confidence in future development. On September 1, 2023, the board of directors of the company agreed that the company would use its own capital to repurchase some of the company's issued shares through centralized bidding. The total capital used to repurchase shares was 3-5 billion yuan. On the same day, the company director, and four other executives, including Mr. Zhang Jinwei, increased their holdings of the company's shares by a total of 254,000 shares, accounting for 0.33 percent of the company's total share capital, with a total increase of 9.4478 million yuan. Management increased their holdings of shares at low stock prices, demonstrating their confidence in the long-term development of the company.
Risk factors: downstream demand for lithium falls short of expectations; lithium prices fall more than expected; the company's overseas mine expansion progress falls short of expectations; risk of foreign exchange rate fluctuations; and progress of the lithium salt project under construction by the company falls short of expectations.
Profit forecasting, valuation and ratings: Thanks to prominent cost advantages, 2023Q3 companies' performance rebounded month-on-month. We expect that in the future, the company will benefit from complete self-sufficiency in raw materials and gain cost advantages over peers. Considering the recent continuous decline in lithium prices, the company's net profit per ton of lithium salt is expected to be lower than previous expectations, so we lowered the company's 2023-25 net profit forecast to 25.99/29.60/3.393 billion yuan (the original forecast value was 30.81/37.83/4.07 billion yuan), corresponding to the 2023-25 EPS forecast value of 3.61/4.11/4.71 yuan/share. Currently, comparable companies in the lithium industry (Ganfeng Lithium, Yahua Group, Zangge Mining, Tibet Mining) in 2024, Wind unanimously predicted an average PE valuation level of 9 times. Considering the company's expectations of future growth and strong cost advantages, it gave the company a PE valuation of 10 times in 2024, with a corresponding target price of 41 yuan/share, maintaining a “buy” rating.