Key points of investment

The company released its 2023 annual report, achieving operating revenue of 21.06 billion yuan, an increase of 15% over the previous year. Net profit attributable to mother was 1.05 billion yuan, a year-on-year decrease of 39.4%.

The company's wet method phase 1 phase 2 project achieved overproduction in 2023, and the wet process phase 3 steadily promoted the smooth commissioning and production of the second phase of the company's wet process project. The first phase 2 of the wet process project achieved an annual design capacity of 55,000 metal tons of nickel ahead of schedule and achieved overproduction. The total production of hydrometallurgical products totaled 620,000 tons of metallic nickel throughout the year.

The first phase and second production lines of the company's HPAL project were successfully put into operation within 2 months after they were put into operation, setting a number of industry records. The company's HPAL project is the lowest cash-cost nickel-cobalt compound production project. The wet process phase 3 obtained a loan of 780 million US dollars. The core production equipment for the wet phase III project has arrived at the site, and the production line is being built in an orderly manner.

After all production is put into operation, the Liqin HPAL project (phase 1 to 3) is expected to have a production capacity of 120,000 metal tons of nickel-cobalt compounds, continuously consolidating Liqin Resources's industry-leading competitive advantage.

The first phase of production of the company's Fire Law expired, and the second phase progressed steadily

The first phase production lines of the Fire Law Project began to be put into operation in October 2022, and all eight lines were put into operation and full production in 2023. Among them, indicators such as single consumption of baking sand, consumption of nickel monolayer carbon, and nickel single lignite consumption all reached the advanced level of the same industry. The RKEF project achieved a cumulative total of more than 70,000 metal-tons of nickel produced throughout the year. Construction related to the second phase of the Fire Law Project continues to steadily advance the construction of the project according to the established plan. After completion, it will have a design production capacity of 185 thousand tons of nickel and iron per year.

The fall in nickel prices in 2023 dragged down the company's gross profit

According to the company's annual report, the company's wet process project had revenue of 7.241 billion yuan and gross profit of 2,783 billion yuan. Assuming that the company's MHP is fully sold, the price of a single ton wet method product, MHP, is 117,000/metal ton, and the cost is 72,000/metal ton. The gross margin of the company's wet process project fell to 38.4% from 49.2% in 2022. The company's gross margin for producing its own nickel-iron fell to 5.8% from 8.5% in 2022. The company's overall gross margin fell to 16.1% from 24.6% in 2022.

The company has a long-term stable supply of core upstream resources and long-term cooperation with the company's Indonesian partner's mining resources on Obi Island to provide a stable supply of nickel ore raw materials for the company's smelting projects. In the Philippines, the company has established long-term partnerships for over 10 years with leading miners such as the Asian nickel industry and CTP, which can provide a stable supply of nickel ore for the company's nickel ore trading business.

Downstream companies have established long-term stable relationships with leading companies in the stainless steel industry and the new energy vehicle industry.

Profit forecasting and valuation

Nickel prices experienced a volatile correction in 2023 and are currently fluctuating at the bottom. We expect the company's net profit from 2024-2026 to reach 1.27 billion, 1.98 billion, and 2.11 billion, respectively, with year-on-year increases of 20%, 57%, and 6%, respectively.

With its own cost advantage, the company still maintains industry-leading profitability, and the third phase of the wet method is progressing steadily. Future growth is obvious, and the purchase rating is maintained.

Risk warning

Nickel prices fluctuated greatly, the company's project progress fell short of expectations, and sales of new energy vehicles fell short of expectations.