Sign an electrolyte supply agreement with Ningde Times, or continue to increase the company's market share
On June 17, the company signed a “Material Supply Agreement” with Ningde Times to supply 58,600 tons of solid lithium hexafluorophosphate products to Ningde Era, which is expected to increase the company's market share and accelerate the clearance of production capacity in the industry. We maintain our profit forecast. The company's net profit for 2024-2026 is estimated to be RMB 11.10/20.16/2.486 billion yuan, respectively. Referring to the consistent expectations of the company's 25-year Wind, the average PE is 15 times. Considering that the profit of the electrolyte business is at the bottom, the company's cost advantage is clear, and the market share has increased. The company was given 25 times reasonable PE in 25 years, corresponding to a target price of 26.27 yuan (previous value of 26.19 yuan), maintaining a “buy” rating.
Electrolyte supply agreement signed with Ningde Times
On June 17, the company signed a “Material Supply Agreement” with Ningde Times. It is agreed that from the effective date of the agreement until December 31, 2025, it will supply the corresponding amount of electrolyte products using 58,600 tons of solid lithium hexafluorophosphate to Ningde Era. This quantity can fluctuate no more than 5% according to negotiations between the two parties. Among them, the price of lithium hexafluorophosphate, the raw material for the electrolyte consists of battery-grade lithium carbonate and other costs. Among them, the price of battery-grade lithium carbonate is the average market price of the previous month multiplied by the agreed consumption factor. If the price of lithium hexafluorophosphate continues to fluctuate greatly compared with the average market price, then the two parties renegotiate the pricing. We estimate that 58,600 tons of lithium hexafluorophosphate correspond to about 500,000 tons or more of electrolyte, corresponding to about 500 GWh of battery demand, and the company's share in the Ningde era is expected to increase further.
The company is further seizing market share and is expected to accelerate lithium hexafluorophosphate production capacity. The price of lithium hexafluorophosphate is at a low cyclical level, and the profitability of the industry is generally under pressure. Apart from a few leading companies in the industry that are still marginally profitable, it is expected that the rest of the companies will generally lose money, and the price and profitability have basically bottomed out. Currently, industry share is being concentrated at an accelerated pace. Tianci is now increasing its share in major customers. At the same time, it will accelerate the expansion of liquid lithium hexafluoride salt sales starting this year, which is expected to further reduce the capacity utilization rate of tail companies, speed up industry clearance, or push the price rebound of lithium hexafluorophosphate ahead of time. Subsequent upward price flexibility and increased capacity utilization of lithium hexafluorophosphate are expected to increase the company's profitability.
The integrated layout is perfect, and the pace of new product development is steady
The company is leading the industry in terms of integration. It already has supporting lithium hexafluorophosphate production capacity of about 112,000 tons per year. At the same time, it is actively laying out upstream resource recycling business, covering the entire industry chain from lithium carbonate to electrolyte, and the cost advantage of integration has been further enhanced. Overseas, the company's German OEM plant was successfully put into operation, the US electrolyte project continues to advance, and the company plans to promote integrated overseas production capacity by setting up a subsidiary in Morocco. The company continues to promote the use of LIFSI in lithium iron phosphate batteries and invests heavily in the development of new products, including lithium iron ultra-high energy density systems, ternary high nickel systems, ternary high voltage systems, silicon-carbon systems and fast charging and semi-solid/solid state electrolytes and supporting solutions.
Risk warning: Electrolyte demand falls short of expectations; lithium hexafluorophosphate prices are lower than expected; the degree of application and profitability of LiFSi falls short of expectations.