Domestic lithium iron phosphate cathode material leader, binds core customers to develop together

The company is a leading domestic lithium iron phosphate cathode material enterprise. The downstream is deeply tied to the core customers of the BYD and Ningde era, and both are strategic investors. The company has achieved common development by binding core customers.

We expect the company's revenue for 2024-2026 to be 374/406/43.3 billion yuan, respectively, net profit to mother of 16.6/25.0/3.10 billion yuan, EPS 2.19/3.30/4.09 yuan/share, respectively. The current stock price corresponding to PE is 18.6/12.3/9.9 times, respectively, covered for the first time, giving it a “buy” rating.

High share of lithium iron power+fast growth rate of lithium iron for energy storage+low penetration of lithium iron iron phosphate in the lithium iron market space. Demand for lithium iron phosphate cathode materials mainly benefits from: (1) High share of domestic lithium iron models: domestic lithium iron models account for 67.3% of the installed capacity in 2023, and it is expected that the future will continue to rely on high cost performance to maintain a high share; (2) Global energy storage development is on the rise: in 2022, China's energy storage battery shipments are 130 GWh, an increase of 1.7 times over the previous year. We expect to reach TWh level 3 (3) Accelerating lithium entry: penetration rate of lithium iron overseas Low. Overseas lithium iron models are expected to be released one after another in 2024-2026.

We expect that as the global penetration rate of new energy vehicles continues to increase, demand for energy storage will maintain a high growth rate. Overseas lithium iron phosphate from zero to 1, global demand for lithium iron phosphate cathodes is expected to exceed 2.23 million tons in 2025, and global demand for lithium iron phosphate cathodes will reach 6.13 million tons in 2030.

With the integrated advantages of production capacity, management, customers, and profit, the leader is expected to cross the cycle? Production capacity: The company's total planned production capacity exceeds 1 million tons. In 2021-2023, the lithium iron phosphate market share ranked first in the industry for three consecutive years, with a share of more than 30%;? Customer: Combined with major customers, Ningde Times and BYD, B+C accounts for nearly 80% of domestic lithium iron models;? Management: Excellent inventory management and raw material procurement capabilities are the core competitiveness of lithium iron manufacturers;? Profit: With its large scale advantage, excellent raw material procurement and inventory management, and upstream integration, the company's profitability is superior to its peers.

Risk warning: risk of oversupply in the industry; risk of capacity utilization falling short of expectations; risk of poor penetration of lithium iron overseas.