Core views:
The volume and price of major products increased and fell, and revenue increased 5% year-on-year in '23. According to Huayou Cobalt's 2023 annual report, revenue for 23 was 66.3 billion yuan, +5% year-on-year, and net profit to mother was 3.4 billion yuan, -14% year-on-year. According to the company's 2024 quarterly report, 24Q1 revenue was 15 billion yuan, -22% year-on-year, and net profit to mother was 500 million yuan, or -49%. Performance declined year-on-year due to falling prices of cobalt, nickel, tertiary precursors, and cathode materials in '23. Affected by falling metal prices, 24Q1 results declined sharply year over year.
Major products are shipped as scheduled, and global cooperation is expected to stabilize future growth. According to the company's 2023 annual report, the company shipped nearly 150,000 tons of lithium battery cathode precursors in '23, an increase of 31%; shipments of cathode materials were about 95,000 tons, up 5% year on year; shipments of cobalt products were about 410,000 tons (including contract processing and internal self-supply), up 12% year on year; and shipments of nickel products were about 126,000 tons (including contract processing business and internal self-supply), up 88% year on year. It has obtained supply agreements from companies such as Everweft Lithium Energy and Envision Power; established a strategic cooperative relationship with LG Chemical; and launched the construction of a 50,000 ton ternary precursor project in Indonesia; the above projects are expected to open up international supply channels and contribute to global market growth.
Investment in integrated mining and metallurgy is progressing smoothly, and attention is being paid to the release of nickel resources in the Indonesian region. Huafei's 120,000-ton nickel-metal-weight hydrometallurgical smelting project in Indonesia has basically reached production; Huake's 45,000-ton nickel-metal-weight nickel sulfate project has reached production; Huaxiang's 50,000 tonne nickel metal-weight nickel sulfate project has progressed steadily; some electric nickel projects in Quzhou and Guangxi have been completed and put into operation; and the Arcadia lithium mine project in Zimbabwe in Africa has been completed and put into operation. The focus is on the future launch of Indonesian nickel projects.
Profit forecast and investment advice: The company's 24-26 EPS is expected to be 1.81/2.06/2.38 yuan/share, corresponding to the closing price on April 23, 24, and the 24-26 PE is 16/14/12 times. Considering the company's global layout and the obvious long-term advantages of mining and metallurgy integration, the company was given a 24-year PE valuation 20 times, with a corresponding reasonable value of 36.27 yuan/share, giving the company a “buy” rating, referring to the company's 2024 Wind unanimously anticipated PE valuation.
Risk warning: The company's new production capacity construction fell short of expectations; raw material price fluctuations exceeded expectations; market demand growth fell short of expectations.