The company released its 2023 annual report: achieved operating income of 7.951 billion yuan, or -33.96%; realized net profit of 702 million yuan, -87.35% year over year; realized net profit deducted from non-return to mother of 126 million yuan, -97.72% year on year; realized net cash flow from operating activities of 1,530 billion yuan, -11.69% year over year. 23Q4 achieved operating income of 1,323 million yuan, realized net profit of 393 million yuan, and realized net profit withheld from non-mother of 349 million yuan. Some of the 23Q4 private mines and foundry businesses made up for losses caused by inversion of lithium salt costs to a certain extent.

Core product production and sales data: In 2023, lithium concentrate production reached 173,400 tons, an increase of about 2.2 times over the previous year. The increase in lithium concentrate production mainly came from the Sabistar mine in Zimbabwe. In 2023, production of lithium products was 56,700 tons, +19.03% year over year, and sales volume 52,900 tons, +11.45% year over year.

2023 profit distribution plan: It is proposed to distribute cash dividends of 2.40 yuan (tax included) to all shareholders for every 10 shares, and an estimated cash dividend of 219 million yuan (tax included). In addition to the share repurchase amount already implemented by the company in 2023, the total cash dividend for 2023 is estimated to be approximately RMB 2,510 billion, accounting for 35.74% of the net profit attributable to shareholders of listed companies in the consolidated statement.

The short-term slump in lithium prices will not change the company's medium- to long-term development plans

Five major lithium product production bases: 1) Zhiyuan Lithium has an annual production capacity of 42,000 tons of lithium salt; 2) Suining Shengsheng will produce 30,000 tons of lithium hydroxide in the new year, of which 10,000 tons can be flexibly produced; 3) Shengxin Metal plans to produce 10,000 tons of lithium salt per year, and the first phase of 5,000 tons of production capacity will be completed and put into operation in the fourth quarter of 2023; 4) Indonesia Shengtuo's annual lithium salt production capacity is under active construction and is expected to be completed and put into operation in the first half of 2024; 5) Shengwei Lithium has now built and put into operation 500 tons of lithium metal in the first half of 2024; 5) Shengwei Lithium has now built and put into operation 500 tons of lithium metal.

The layout of the four major lithium resources: 1) The raw ore production scale of the Yelonggou spodumene mine in Jinchuan County is 405,000 tons/year, equivalent to about 75,000 tons of lithium concentrate; 2) the Zimbabwe Sabistar lithium project was put into operation in May 2023, with a raw ore production scale of 900,000 tons/year, equivalent to about 200,000 tons/year of lithium concentrate; 3) The company holds 48.06% of Huirong Mining's shares. Huirong Mining currently has 1 prospecting right, and the project is currently undergoing procedures related to transferring prospecting rights to mining rights; 4) Argentina's SESA project is currently undergoing procedures related to transferring prospecting rights to mining rights; 4) Argentina's SESA project is currently in production. It can be 2,500 tons of LCE; the company will drive Construction of a pilot production line for lithium chloride crystals with an annual output of 2,000 tons of lithium carbonate equivalent to lithium carbonate in Pocitos Salt Lake, Argentina.

Risk warning: The supply of raw materials is insufficient; product prices are falling; production and sales are not up to expectations.

Investment advice: Maintain a “buy” rating.

Due to large fluctuations in lithium prices, we have further lowered our 2024-2026 lithium price forecast. The company's 2024-2026 revenue is expected to be 58.50/77.04/9.559 billion yuan, respectively, with year-on-year growth rates of -26.4%/31.7%/24.1%, and net profit to mother of 9.14/9.99/10.53 billion yuan respectively, with year-on-year growth rates of 30.2%/9.3%/5.4%; diluted EPS is 0.99/1.08/1.14 yuan respectively, and PE corresponding to the current stock price is 19/18/17X.

The company focuses on the lithium business, and the midstream production capacity is expanding rapidly. The upstream owns its own mines, and has also signed long order underwriting agreements for raw materials. The downstream has successfully entered the supply chain of domestic and foreign core battery companies. It still has great potential for growth in the future and maintains a “buy” rating.