Event: The company released its 2023 annual report. In 2023, the company achieved revenue of 21.58 billion yuan, -29.8% year-on-year, net profit attributable to mother of 7.91 billion yuan, or -49.2% year-on-year, net profit after deducting non-return to mother of 8.72 billion yuan, or -43.1% year-on-year. Looking at a single quarter, 2023Q4 achieved revenue of 5.79 billion yuan, -19.7% year-on-year, -0.8% month-on-month, net profit of 2.31 billion yuan, -33.6% year-on-year, +360.7% month-on-month, net profit of 3.22 billion yuan after deducting non-return mother net profit of 3.22 billion yuan, -2.2% year-on-year, and +599.7% month-on-month.
Lithium carbonate: The annual production and sales target has basically been achieved, and the cost has increased significantly. 1) Volume: The company currently has a production capacity of 30,000 tons of lithium carbonate. Through technical reform, production and sales targets are 36,000 tons and 40,000 tons in 2023. In terms of actual operation, production and sales in 2023 were 36,000 to 38,000 tons, +16.3%, +24.6%, of which Q4 produced and sold 1.0, 90,000 tons, -12.3% month-on-month, and -28.5%, mainly due to weak downstream demand in Q4; 2) Inventory: By the end of 2023, inventory was 2,619 tons, -1,537 tons year on year; 3) Price: Due to changes in the industrial chain inventory and supply and demand patterns, the average price of lithium fell rapidly in 2023. The average price of electricity carbon (tax included) was 25.6 million yuan/ton compared to -4 7.3%, and the average price of industrial carbon (47.3%) (Tax included) 239,000 yuan/ton, -48.6% YoY. The average sales price of the company's lithium carbonate was 169,000 yuan/ton, or -55.5% YoY. 4) Capital: After deducting mining rights concessions, the cost of a single ton of lithium carbonate in 2023 was about 37,000 yuan, +0.6 million yuan over the same period last year, and the cost advantage is still significant.
Potassium chloride: Potash prices have declined, and costs have risen. 1) Volume: Potassium chloride production target for 2023 is 5 million tons. Judging from actual operations, annual production and sales are 492.6 million tons, -15.1% and +13.3% year-on-year, including Q4 production and sales of 150.4 and 18.37 million tons, +8.7% and +13.0% month-on-month. 2) Price: Affected by import shocks and weak demand in 2023, domestic potash prices dropped significantly. In 2023, the company's price of potassium chloride without tax was 2,610 yuan/ton, -25.5% year-on-year; 3) This: After deducting mining concessions, the cost of a single ton of potassium chloride in 2023 was about 996 yuan, +276 yuan year-on-year.
Core highlights: cost advantage+capacity expansion to consolidate Salt Lake's leading position. 1) Lithium: The subsidiary Lanke Lithium has continuously optimized lithium extraction processes and equipment to increase lithium recovery rates and consolidate the cost advantage of lithium extraction in salt lakes; the company's lithium salt production capacity has formed a “1+2+3+4” layout. Currently, it has a production capacity of 30,000 tons. The 30,000 ton lithium salt project in cooperation with BYD is being piloted, and the new 40,000 ton lithium salt integrated project (20,000 tons of battery-grade lithium carbonate +2 10,000 tons of lithium chloride) is scheduled to be put into operation by the end of 2024. Under the reversal of the lithium industry pattern and a sharp downward trend in the lithium price center, salt lake lithium extraction cost advantage+production capacity expansion has built the core competitiveness of Salt Lake's leading edge. 2) Potash fertilizer: The company currently has a production capacity of 5 million tons of potassium chloride, ranking first in the country, and bears the heavy responsibility of national food security and supply. China's external dependence on potash fertilizer is high, and imports reached a new high in 2023. In the context of food security becoming more and more important, the potash business is expected to contribute to stable performance.
Investment advice: The supply and demand pattern in the lithium industry has been reversed, the lithium price center has declined sharply, and the cost advantage of lithium extraction in Salt Lake is prominent. The company's lithium salt production capacity is expanding at an accelerated pace, and the basic market for potash fertilizer is stable. We expect the company's net profit to be 60.2, 71.4, and 7.79 billion yuan in 2024-2026. The PE corresponding to the closing price on April 3 is 15, 13, and 12 times, maintaining the “recommended” rating.
Risk warning: The price of lithium fell sharply, the supply of potash fertilizer increased beyond expectations, and the progress of production expansion projects fell short of expectations.