Incident: On February 26, the company announced that in order to enhance investors' sense of acquisition and enhance the company's quality and investment value, the company announced an action plan to promote “double improvement in quality and return”. Specific measures include focusing on the main business, driving innovation, increasing repurchases, cash dividends, and improving the quality of credit disclosure.
The company's cash dividend ratio is superior to that of peers, and the actual controller's increase in holdings highlights strong confidence in the company's future development. The company has accumulated dividends of 1.76 billion yuan since 2014-2022, with a dividend ratio of 22%, which is significantly higher than the median of 14% among peers. Mr. Pei Zhenhua, the actual controller of the company, used his own capital to repurchase a total of 130 million yuan from January to July last year, accounting for 0.32% of the company's total shares. Furthermore, the company actively carried out repurchases based on its own financial situation and business development prospects. By the end of January, it had repurchased about 160 million yuan of shares, accounting for 0.74% of the total share capital.
Smelting production capacity is in the first tier in China, and it is expected that prices will be compensated by volume during the era of deep bundling in Ningde. In 2023, the company is expected to generate 135,000 tons of electric hydrogen plus 30,000 tons of electric carbon production capacity. Among them, Tianyi Lithium (holding 75% of the shares) and the 60,000 tons of electric hydrogen production capacity of Sichuan Tianhua (holding 93%) have now reached production; Weineng Lithium (holding 75% of the shares) is planning a 50,000 ton electric hydrogen project, and the first phase of the 25,000-ton electric hydrogen project will reach the intended state of use in 2023Q3; Fengxin Era (holding 75% of the shares) plans to build 100,000 tons of lithium carbonate production capacity. The first phase of 30,000 tons was put into operation in July last year. The long-term plan is to produce 260,000 tons of battery-grade lithium salt. The company is deeply tied to the Ningde era. There are three main ways of cooperation: the first is to set up a joint venture factory. Tianyi Lithium, the main production base, holds 75%/25% of the shares between the company and Ningde Times, respectively. Second, for incoming material processing, Ningde Era holds shares in overseas miners such as the Jiangxi Jianxiawo Mica Mine and Pilbara, and obtains low-cost ore raw materials through its market position and large-scale procurement; in the process of cooperation with the company, some use the incoming material processing model to earn stable processing fees. The third is mutual shareholding. Mr. Pei Zhenhua, the actual controller of the company, holds 5.16% of Ningde Era's shares, and is the fourth largest shareholder of the latter; Ningde Times directly or indirectly holds 0.72% of the company's shares, making it the 7th largest shareholder of the company. The company is backed by downstream industry leaders and is expected to effectively absorb new production capacity to achieve volume compensation.
The resource side continues to incubate green space projects, and the Manono lawsuit has made positive progress. Currently, the company's main sources of underwritten raw materials are AMG and Pilbara. The total annual concentrate sales volume is 220,000 to 250,000 tons; considering the raw materials guaranteed by the Ningde Era, the company's resource guarantee rate is about 39% at this stage. The company is currently the largest shareholder of overseas resource companies such as AVZ, Global Lithium, Premier, and QXR, and has obtained forward underwriting rights for its mines. Among them, AVZ's Manono is one of the largest spodumene mines in the world. Recently, the arbitral tribunal issued an interim decree to restore Dathcom's ownership of the split PR13359 mineral rights. The PR15775 mineral rights are still in dispute. This temporary measure tends to support AVZ and the company's ownership of the area already explored by the mine.
Profit forecast: The sharp drop in lithium prices puts pressure on the company's performance. The prudent reduction of the 2023-2025 electric hydrogen price is assumed to be 23/10/8.5 million yuan/ton. The company is a leader in domestic electricity and hydrogen. Backed by the Ningde era, it is expected to achieve quantitative price compensation, and the resource-side has blossomed more to provide medium- to long-term performance flexibility. The company's net profit for 2023-2025 is estimated to be RMB 17/20/2.2 billion, corresponding PE of 11.2/9.3/8.5 times, maintaining a “buy” rating.
Risk warning: Demand growth falls short of expectations, supply projects are released beyond expectations, and the development of mineral rights in Africa is at risk.