The company released its 2023 annual report: achieved revenue of 40.503 billion yuan, +0.13% year over year; realized net profit of 7.297 billion yuan, -69.75% year over year; realized net profit without return to mother of 7.177 billion yuan, -68.88% year on year.
Among them, 2023Q4 achieved revenue of 7.104 billion yuan; realized net profit attributable to mother - 801 million yuan; and realized net profit deducted from non-mother - 806 million yuan.
In terms of core product production and sales data: The total output of lithium concentrate reached 1,522 million tons in 2023, with a year-on-year increase in production, mainly due to the high grade of raw ore, and the continuous implementation of technical improvement projects, which further increased the recycling rate of various factories. In 2023, the production of lithium compounds and derivatives was about 50,700 tons, +7.30% year over year, and sales volume was about 56,700 tons, -2.48% year over year. By the end of 2023, the company's stocks of lithium concentrate were about 409,400 tons, and the inventory of lithium compounds was about 13,200 tons.
In terms of profit distribution: It is proposed to distribute a cash dividend of 13.50 yuan (tax included) for every 10 shares, and the total amount of cash dividends to be distributed is about 2,215 billion yuan.
Consolidate the layout of upstream lithium resources and focus on increasing production and capacity
Resource side: The pricing method for Greenbush lithium ore changed from quarterly adjustments in the past to monthly adjustments; in addition, Shenghe Lithium, a wholly-owned subsidiary of the company, introduced Zijin Mining as a strategic investor through capital increases and stock expansion. It has the right to mine lithium mines in Yajiang County. Shenghe Lithium obtained the Yajiang County Development and Reform Bureau's registration on the Cuola Spodumene Tebaigou Tailings Depot project on January 9, 2024.
Product side: The company currently has 5 production bases for lithium chemical products in production, with a comprehensive production capacity of 88,800 tons/year, and production capacity will further increase to over 140,000 tons/year in the medium term. Among them, the Anju Plant Project in Suining, Sichuan confirmed the production of products that meet battery-grade lithium carbonate standards on December 21, 2023; lithium hydroxide products produced by the Quinana Plant Project in Australia have received samples from SK On Co. Ltd and NorthVoltett AB have been certified, and shipments will begin in January 2024.
Investment side: The company holds 22.16% of SQM's shares and is its second largest shareholder. SQM sold around 170,000 tons of lithium salt in 2023, +8.42% year over year. SQM achieved operating income equivalent to RMB 52,449 billion in 2023, realized net profit equivalent to RMB 14.136 billion, and announced dividends equivalent to approximately RMB 10.661 billion. SQM expects lithium salt sales to increase 5-10% year over year in 2024.
Risk warning: Project construction progress falls short of expectations; production and sales of lithium ore and lithium salt products fall short of expectations.
Investment advice: Maintain a “buy” rating.
Due to large fluctuations in lithium prices, we have further lowered our 2024-2026 lithium price forecast, so we have further lowered the company's profit forecast. The company's 2024-2026 revenue is expected to be 117.29/137.62/160.82 (original forecast 199.06/200.36/-), with year-on-year growth of -71.0%/17.3%/16.9%; net profit to mother is 45.27/53.03/62.08 (original forecast 84.83/92.98/-), respectively, with year-on-year growth rates of -38.0%/17.1%/17.1%; diluted EPS is 2.76/3.23/3.78 yuan, respectively, and the PE corresponding to the current stock price is 17/ 15/13X Considering that the company has the best spodumene and lithium salt lake resources in the world, the resource side still has strong potential to expand production, providing a solid raw material guarantee for the rapid expansion of midstream lithium salt production capacity. Medium- to long-term growth is worth looking forward to, and maintaining a “buy” rating.