Core views
The company's 2023 performance was pre-reduced by 62.9%-72.6%. The decline in performance was affected by falling lithium prices, increased minority shareholders' equity, and reduced investment income. As lithium prices entered the bottom range and the pricing model for Greenlithium concentrate changed to M-1, the company's profitability may have improved marginally. The company has world-class high-quality lithium ore resources, and the cost is in the lowest tier in the world. It has a strong profit margin in the lithium price downward cycle. At the same time, the company has abundant cash flow and the potential and advantage of bottom expansion. Lithium ore and lithium salt processing capacity is expanding simultaneously, and future growth is still obvious.
occurrences
Earnings declined ahead of schedule. Net profit for 2023 is expected to be 66.2-8.95 billion yuan. On the evening of January 30, 2024, Tianqi Lithium announced the 2023 performance forecast. Net profit attributable to shareholders of listed companies was 6.62 billion yuan to 8.95 billion yuan, down 62.90%-72.56% from the previous year. Net profit profit after deducting non-recurring profit and loss was 6.50 billion yuan to 8.82 billion yuan, down 61.75%-71.81% from the previous year. Basic earnings per share were 4.04 yuan/share — 5.46 yuan/share, and profit of 15.52 yuan/share for the same period last year.
Brief review
The decline in performance was affected by the decline in lithium prices, the increase in profit and loss of minority shareholders, and the decline in investment income. The company's product sales price fell from the previous year. According to SMM data, the average annual prices of battery-grade lithium carbonate and battery-grade lithium hydroxide in 2023 were 25.88/263,300 yuan/ton, respectively, down 46.35% and 43.84% from 2022. At the same time, it was affected by weak downstream consumption, etc. Second, the Australian lithium mine Greenbushes consolidated financial data report, but the company only holds about 26% of revenue, so how many shareholders have profit or loss. The price of lithium concentrate has risen compared to 2022, leading to an increase in income tax and minority shareholders' profits and losses. Third, the associated company SQM's profit declined due to the decline in lithium prices, and the company's investment income declined markedly.
The net profit for Q4 is expected to be -18.09-851 billion yuan. Profitability declined month-on-month, and the company's net profit for the first three quarters is expected to drop 1.81 billion yuan - profit of 850 million yuan, and Q4 profitability dropped sharply. First, because Q4 lithium prices continued to fall, the average price of battery-grade lithium carbonate was 140,500 yuan (-41.61%). Second, the price pricing model for Greensalts concentrate was lagging behind. The price of lithium concentrate purchased by domestic lithium salt plants was phased higher than the market, causing domestic lithium salt production costs to fall. Hang it up.
Green's pricing model changed, marginal improvement in profitability. Sales of Greenconcentrate products were only for shareholders Yabao and Tianqi Lithium. Previously, the pricing model was Q-1. Lithium prices fell rapidly, causing price adjustments to lithium concentrate purchased by shareholders lagging behind, and the price of lithium concentrate purchased by the company was higher than the market. The IGO announcement revealed that from January 1, 2024, the concentrate pricing model will be adjusted to M-1 (based on the average price of lithium salt in the previous month), and the company's lithium salt processing cost inversion will be significantly reduced, and profitability is expected to improve marginally.
With high-quality resources in the first tier of global cost, the leading lithium mine company has four major resource layouts: the controlled Australian Greenfinite mine is a world-class high-quality spodumene mine with large reserves, high output, high grade and low cost. The participating SQM has a world-class high-quality lithium salt lake Atacama. It is currently the largest lithium salt lake in the world, with reserves of 45.51 million tons of LCE, and a lithium ion concentration of over 1500 mg/L. The magnesium-lithium ratio is only 6:1. It is one of the world's best and lowest-cost salt lakes. In addition, the reserved Zola spodumene mine is located on the largest methylcard mine in China. Zabuye Salt Lake, which has a 20% stake, is one of the highest quality salt lake assets in the country. The company's production costs in production mines are all in the first tier in the world. When lithium prices fall or even when the industry is liquidated, the company can have a strong profit margin within the industry without fear of a downward cycle. Furthermore, the company has abundant cash flow and has the potential and advantage of bucking the trend at the bottom of the cycle.
Mining and salt are expanding at the same time, and future growth is still remarkable
(1) The Greensalts mine has a concentrate production capacity of 1.62 million tons/year. The No. 3 processing plant is under construction. It is expected to be put into operation in mid-2025, with a concentrate production capacity of 2.64 million tons/year; the No. 4 processing plant is scheduled to start construction in 2025 and be completed and put into operation in 2027. At that time, the total scale will reach 2.66 million tons/year concentrate production capacity. (2) The Sichuan Cuola spodumene mine is part of the methyl card mine field. The company is actively promoting the feasibility study of restarting the Sichuan Yajiang Cuola Spodumene Mine Phase I Project and promoting relevant license applications. (3) The battery grade lithium carbonate project with an annual output of 20,000 tons at the Anju Plant was completed and put into operation in the second half of 2023. Qualified battery-grade lithium carbonate products have now been produced, and the volume is expected to be stable in 2024. (4) The company plans to invest in the construction of a project with an annual output of 30,000 tons of battery-grade lithium hydroxide monohydrate and 60,000 tons of anhydrous sodium sulfate in Zhangjiagang, Jiangsu Province. The project is scheduled to start construction in 2024. The transformation period is expected to be 24 months, and production will be put into operation in early 2026. After completion, the company's production capacity will be further increased. In the company's strategic plan for the next five years, production capacity is planned to reach 300,000 tons/year.
Profit forecast: It is estimated that in 2023-2025, the company's net profit to mother will be 79.2/40.1/6.15 billion yuan, corresponding to the current share price PE of 8.7/17.2/11.2.
1. Although profits in 2023-2024 may be pressured by falling lithium prices, the company has an outstanding cost advantage, and has a thick profit margin during the downturn in the industry cycle, and is not afraid of cyclical fluctuations; 2. The company's stock price has been adjusted a lot recently, the valuation level is low, and the cost performance ratio of buying and long-term holding is gradually highlighted; 3. The company's lithium mine and lithium salt production capacity continues to expand, and the associated company SQM also has plans to expand production in the future, so the company's future scale is still large, and the scale of lithium ore lithium salt production capacity is more consistent, and the degree of integration is higher; 4, at the same time The company has abundant cash flow and a bottom Expansion potential and advantages. As the cycle increases, the company's high-quality lithium ore resources will give the company significant upward flexibility. Although the company's short-term performance is under pressure, the company is basically oriented well, has strong ability to resist cyclical fluctuations, and is optimistic about the company's long-term development, so it maintains the company's “buy” rating.
Risk warning: Lithium is in an oversupply pattern, and lithium prices are still in a downward cycle, and there is a risk that the company's performance will continue to decline in 2024; high-cost lithium mines will continue to decline in the downturn cycle; if supply cuts fall short of expectations or cause lithium prices to be at the bottom of the cycle for a long time, long-term low prices will affect the company's expectations of a recovery in 2025 performance; in downstream consumption, the NEV production and sales volume falls short of expectations, and lithium prices are weak; the company's growth is reflected in new energy vehicle production capacity falling short of expectations or leading to poor consumption and weak lithium prices; the company's growth is reflected in the commissioning of new energy vehicles, if the new production capacity is not put into production as fast as It is expected to affect the release of the company's performance; the company's main asset, the Greenwich lithium mine, is located in Australia, and SQM, an important joint venture, is located in Chile, South America. There is a risk that the geopolitical conflict will affect the production and operation of the company's overseas resources.