Investment events
The company disclosed its 2023 annual report. The 2023 operating income was about 15.127 billion yuan, down 28.86% year on year; net profit to mother was about 1.924 billion yuan, down 14.8% year on year; it plans to distribute 7.52 yuan (tax included) for every 10 shares to all shareholders.
Key points of investment
Fourth-quarter results are in line with expectations. It is proposed to raise additional capital from controlling shareholders. In the fourth quarter of 2023, the company's operating income was 2,584 billion yuan, down 64% year on year; net profit to mother was 433 million yuan, down 44.56% year on year. On February 8, 2024, the company announced an issuance plan to specific targets to issue A shares to the controlling shareholder Mining and Metallurgy Group. All mining and metallurgy groups participated in the subscription in cash, raising a total capital of not less than 800 million yuan and no more than 1 billion yuan.
The production capacity utilization rate of lithium battery materials remains at a high level. By the end of 2023, the company has built an annual production capacity of 110,000 tons of lithium battery materials, with an actual effective annual production capacity of 83,000 tons, including 77,000 tons of diverse materials, an annual capacity utilization rate of 71%; 6,000 tons of lithium cobalate, with an annual capacity utilization rate of 55%, and a production capacity of 40,000 tons/year for lithium iron phosphate (manganese). Overseas, the company signed a cooperation agreement with the Finnish Mining Group and Finnish Battery Chemicals Co., Ltd., and the base plans to have an annual production capacity of 500,000 tons, including 200,000 tons of multi-materials and 300,000 tons of lithium iron phosphate (manganese). The first phase of the project has a production capacity of 60,000 tons of high-nickel polymaterials.
Various types of new cathode products are gradually being expanded. In terms of new models, the company continues to sell many high-energy, high-safety, and long-life lithium phosphate (manganese) iron and iron materials to China in bulk to first-class domestic power and energy storage battery customers such as Xinhang, Kexin, and Yichun Qingtao. In the future, mass production capacity will be further increased with the construction of the Panzhihua New Materials Industry Base. In terms of the commercial application of solid state lithium battery cathode materials, the company's sales volume of ultra-high nickel products increased several times over the same period last year, and shipped hundreds of tons within 2023, continuously increasing the supply share of solid-state battery customers such as Huineng, Qingtao, Weilan New Energy, and Ganfeng Lithium, and successfully used in solid-state models of global first-tier car companies such as SAIC Motor Group and Vietnam's VinFast. In terms of sodium cathode materials, the company actively lays out sodium electric cathode materials with different systems, such as layered oxides and polyanions. The products are more cost-effective, the electrochemical performance is better, and the shipment volume continues to grow steadily. In 2023, it was possible to supply hundreds of tons to many customers at home and abroad.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. Considering that competition in the industry continues to intensify and overseas policy uncertainty is strong, we carefully lowered the company's net profit to mother for 2024-2025 to be 1,172 billion yuan and 1,353 billion yuan respectively (2,441 billion yuan and 2,839 billion yuan before the reduction, respectively), and added the 2026 forecast to 1,543 billion yuan. The corresponding EPS was 2.31, 2.67, and 3.05 yuan, respectively, and the corresponding PE was 20, 18, and 15 times, respectively, to maintain the “buy” rating.
Risk warning
Material prices fluctuate greatly, customer order demand falls short of expectations, slow development of new products, etc.