Description of the event

On July 25, 2024, the company announced that its wholly-owned subsidiary Zijinlongjing Clean Energy Co., Ltd. will carry out the construction of the first phase two power supply project of the Laguocuo Salt Lake Source Network Load Storage Demonstration Project in the BOO format, which is configured according to the 75MW photovoltaic+126.25mW/405MWh electrochemical energy storage scheme.

Incident comments

The estimated annual power generation capacity of Phase I and Phase II projects is 0.14 billion kilowatts, and the estimated settlement price is 0.798 yuan/kWh. On March 29, 2024, the first phase of the project was completed for 115 mW+65 mW/130 MWh of electrochemical energy storage, which can meet the energy supply requirements of the Lago lithium mine project for 8 hours of electricity load during the day, steam load, and 5 MW of electricity load at night. In order to meet the power supply requirements for the remaining 16 hours of the Laguo lithium mine project (steam load is provided by natural gas), Zijinlongjing plans to construct the first phase two power supply project in the BOO format, which will be configured according to the 75MW photovoltaic+126.25mW/405MWh electrochemical energy storage scheme. The estimated dynamic investment amount of the project is 0.6 billion yuan. The project is expected to be put into operation in the third quarter of 2024. After completion, the average annual power generation is expected to be 0.14 billion kilowatts, and the estimated settlement price is 0.798 yuan/kWh (tax included).

According to conservative estimates, the Laguocuo Phase I and Phase II project is expected to bring in net profit of 0.037 billion yuan per year. The estimated settlement price of the project is 0.798 yuan/kWh (tax included). Considering that the Internet power generation price in the Ali region where Lagocuo is located is 0.25 yuan/kWh, and the project is a source network load storage project requiring the construction of energy storage and other equipment, the electricity cost is 0.35 yuan/kWh, the value-added tax rate of the project is 13%, the income tax rate is 25%, and the annual power generation capacity of the Phase I and Phase II project is 0.14 billion yuan. It is estimated that the Phase I and Phase II projects will achieve operating income of 0.112 billion yuan per year and net profit of 0.037 billion yuan; Laguo is expected to achieve annual operating income of 0.112 billion yuan and net profit of 0.037 billion yuan; Lago is expected to achieve an annual operating income of 0.112 billion yuan and a net profit of 0.037 billion yuan; Lago is expected to achieve an annual operating income of 0.112 billion yuan and a net profit of 0.037 billion yuan; Lago is expected to achieve annual operating income of 0.112 billion yuan and net profit of 0.037 The total annual operating income of the wrong phase one phase and phase one phase two projects can achieve an annual operating income of 0.216 billion yuan and a net profit of 0.088 billion yuan.

Announced the completion of the first phase of the Duobaoshan Scenery Project in Heilongjiang, the termination of the battery R&D and pilot line project, and the high-tech composite environmental absorbent project. On July 25, the company announced that the main construction of the “Heilongjiang Duobaoshan Phase I 200MW Scenery Project” has been basically completed. Currently, it is actively proceeding with the procedures related to the grid connection and the completion of the project. Affected by the profitability of the energy storage market, the “Battery R&D and Pilot Line Project Phase II” will no longer be built (the original plan was to invest 0.18 billion yuan to test 0.4 GWh production line); due to the decline in the prosperity of the coking industry, the company plans to terminate the “High Performance Composite Environmental Absorbent Project”. The company plans to use a total of 0.572 billion yuan of capital raised remaining after the completion and termination of the above fund-raising projects to permanently supplement working capital.

On July 1, the company announced that it had increased its holdings by more than 1% 7 times since the end of October 2023. During this period, Zijin increased its holdings by 80.3876 million shares, a total change of 7.44%. After this increase, Zijin held a total of 23.15% of the company's shares. Controlling shareholders are once again empowered and increased, which is conducive to increased synergy with the company.

The energy storage business is progressing smoothly during the construction of the nearly 1GW wind and green power project. In 2023, the company signed a contract for more than 2 GW mine green power projects, and more than 27 projects are under construction (scale of nearly 1 GW); 1.65 billion yuan of energy storage orders were in hand at the end of 2024Q1.

Profit forecast and valuation: The company has clarified the “environmental+new energy” two-wheel drive strategy. The main environmental protection business has strong ability to take orders. Green Power has begun to contribute to performance, the energy storage business is expanding smoothly, and it has entered the mining equipment business; since the end of October 2023, Zijin has announced 7 times to increase its holdings by more than 1%. The company is expected to achieve net profit of 1.108/1.401/1.706 billion yuan in 2024-2026, up 117.7%/26.5%/21.7% year over year, corresponding to PE valuation of 11.3x/8.9x/7.4x. Give it a “buy” rating.

Risk warning

1. Competition for flue gas control intensifies and profit levels fluctuate; 2. The energy storage industry is fiercely competitive and profitable.