Incident: Huayou Cobalt released its 2023 annual report and 2024 quarterly report. The company achieved operating income of 66.304 billion yuan in 2023, +5.19% year-on-year, net profit to mother of 3.351 billion yuan, -14.25% year-on-year, after deducting net profit of not attributable to mother of 3,093 billion yuan, or -22.25% year-on-year. The company achieved operating income of 14.963 billion yuan in 2024Q1, -21.70% year-on-year, net profit to mother of 522 million yuan, or -48.99% year-on-year, after deducting net profit of 568 million yuan without return to mother, or -42.97% year-on-year.
Comment: In 2023, the company's ternary precursor shipments bucked the trend, and high-nickel ternary cathode shipments accounted for about 83%. In 2023, the company shipped 1291,000 tons of ternary precursors, up 30.64% year on year; shipments of cathode materials were about 95,000 tons, up about 5% year on year. Among them, shipments of ternary cathodes were about 81,000 tons, and shipments of 8 series and above high nickel ternary cathodes exceeded 67,000 tons, accounting for about 83% of ternary cathode shipments. Against the backdrop of a slowdown in ternary cathode growth, the company realized the advantages of integration, and shipments of ternary precursors bucked the trend, and its share continued to rise. In terms of overseas market development, the company entered the supply chain of Japanese car companies through various channels and deepened global cooperation with local cathode-battery-automobile chains in Europe and the US such as VW, Ford, and BASF.
Huafei is expected to contribute more than 100,000 tons of wet process in 2024, and shipments of nickel intermediates are expected to nearly double throughout the year. In 2023, the company shipped about 126,000 tons of nickel products (including contract processing and self-supply), an increase of 88% over the previous year. It is estimated that about 40,000 tons of electrolytic nickel will be shipped and more than 80,000 tons of nickel sulfate will be shipped. In terms of nickel intermediates, it is estimated that in 2023, the company's MHP will ship nearly 90,000 gold tons, and high-ice nickel will be shipped about 50,000 gold tons. By the end of 2024Q1, the company had built Huayue's 60,000 gold tons of MHP hydrometallurgy project, Huake's high-ice nickel project with an annual output of 45,000 gold tons, and Huafei's MHP hydrometallurgical smelting project with an annual output of 120,000 gold tons, with a total production capacity of 225,000 gold tons of nickel intermediates. In addition, the company, together with Vale and Ford Motor, built the 120,000-ton Pomalaa high-pressure acid immersion method project, and completed the equity transfer of the project company at the end of 2023.
Promote a global integrated layout and lay out overseas lithium battery material production capacity at multiple points. The company accelerated the construction of overseas lithium battery material production capacity, launched the construction of high-nickel ternary cathode materials in Bamo, Hungary, and obtained fixed-point supply agreements with power battery companies such as Everweft Lithium Energy and Envision Power. The first phase of 25,000 tons of production capacity is expected to be completed in 2025; a joint NCMA cathode material project with an annual output of 66,000 tons with an annual output of 66,000 tons is currently under trial production; in addition, it has set up a joint venture for lithium salt processing in Morocco. The construction of overseas production capacity will help the company further open up international supply channels and achieve breakthroughs in the European and American markets.
Investment advice: Considering fluctuations in lithium and nickel metal prices, the company's annual performance is lowered. Net profit due to mother is expected to be 39.79, 51.05, and 6.018 billion yuan in 2024-2026, up 18.76%, 28.29%, and 17.88% year-on-year, corresponding to PE 12, 9, and 8 times, maintaining the “buy” rating.
Risk warning: New energy vehicle sales fell short of expectations, industry competition intensified, and raw material prices fluctuated.