Key points of investment
The company released its 2023 annual report. In 2023, the company achieved operating income of 40.503 billion yuan, +0.13% year on year; net profit to mother was 7.297 billion yuan, -69.75% year over year. Among them, Q4 revenue for the single quarter was 7.104 billion yuan, or -55% year-on-year, and net profit to mother - 801 million yuan. The company's overall gross profit margin and net profit margin in 2023 were 84.99% and 63.36%, respectively, -0.13% and -13.55% year-on-year, respectively.
Greenbush's lithium concentrate production reached 1.52 million tons in 2023. In 2024, the pricing mechanism was changed to M-1's lithium concentrate production of 1.52 million tons, +12.9% year over year; gross profit was 24.6 billion yuan, +89.8% year over year, and the gross profit ratio increased to 71.5% from 37.6% in '22. In 2023, Thalison sold a total of about 810,000 tons of lithium concentrate to Yabao, with a sales amount of about RMB 26.174 billion. Greenbush adjusted the underwriting pricing mechanism. Starting January 1, '24, the pricing method was adjusted from the original quarterly pricing to “M-1.” According to Fastmarkets' 2023 Q4 data, the Greenbush lithium mine is the lithium mine project with the highest lithium concentrate production in 2023, accounting for 27% of the world's total hard rock lithium production in 2023; at the same time, the Greenbush spodumene mine is also the mine with the lowest cash cost among the major spodumene mines produced in 2022.
The company sold 57,000 tons of lithium salt in 2023, and the company's mid-term planned smelting capacity reached 143,800 tons of lithium chemical products, respectively, with a year-on-year output of 5.1 million tons; gross profit was 9.81 billion yuan, yoy -54.3%, and the gross profit ratio fell to 28.5% from 62.4% in '22. The company has now built five production bases for lithium chemical products, with an annual production capacity of 88,800 tons. The company is constructing battery-grade lithium hydroxide projects with an annual output of 30,000 tons and 24,000 tons in Zhangjiagang and Quinana (Phase II) in Australia, respectively. In addition to the feasibility study of the construction of the 1,000 ton lithium metal and supporting materials project in Chongqing, the company's total lithium compound production capacity will reach 143,800 tons after the completion of the above projects, which is expected to further strengthen the company's leading position in the lithium chemical industry.
SQM contributed approximately $3.13 billion in investment income
In 2023, the company participated in 22.16% of the subsidiary SQM lithium salt sales volume, up 8.42% year on year. Due to the overall decline in lithium prices in 2023, SQM achieved net profit of about 14.14 billion yuan, a year-on-year decline of about 48%.
In 2023, it contributed about $3.13 billion in investment income. During the reporting period, the company received a dividend discount of about RMB 2,276 billion from SQM. SQM is expected to continue to bring rich investment income and dividends to the company in the future.
The company accelerates the development of high-quality domestic lithium resources
The company is actively and orderly advancing the work related to the Yajiangzola spodumene ore mining and selection project. Shenghe Lithium, a holding subsidiary of the company, and other lithium industry enterprises in the methyl card mining area jointly invested to establish a joint venture to build a 220kV power transmission and transformation project to meet the electricity needs of all parties. The establishment of the joint venture will provide infrastructure guarantees for the subsequent progress of the Zola project.
Profit forecasting and valuation
The company currently holds the Greenbush mine, which has the largest production capacity and the lowest cost in the world, and is participating in SQM, the world's largest salt lake lithium extraction company. Midstream smelting production capacity continues to expand, and the company's leading position is stable and growth is obvious. Due to the sharp decrease in current lithium prices compared to the average price in 2023, we cut the company's profit. We expect the company's net profit to be 3.76 billion yuan, 3.98 billion yuan, and 5.0 billion yuan respectively in 2024-2026, -48.5%, +5.8%, and +25.8% year-on-year, respectively. EPS was 2.29/ 2.42/ 3.05 yuan/share, respectively, and the corresponding PE was 20.9/19.8/15.7 times, respectively, maintaining the company's purchase rating.
Risk warning
Sales of new energy vehicles fell short of expectations, the progress of the company's projects fell short of expectations, and lithium prices fluctuated greatly.