Investment events

In the first half of 2024, the company achieved revenue of 17.338 billion yuan, a year-on-year increase of 33.99%; net profit to mother was 0.701 billion yuan, an increase of 69.70% year-on-year.

Key points of investment

Profitability has increased significantly, and the overall quality of operations has improved

In the first half of 2024, the company actively promoted the “gross margin improvement project”. The gross sales margin reached 13.51%, an increase of 0.93 percentage points over the previous year; the net sales margin reached 4.61%, an increase of 0.32 percentage points over the previous year. By business, the gross margin of the new energy battery materials business increased sharply from 14.88% to 16.72%, an increase of 1.84 percentage points; the gross profit margin of nickel resource products was 30.16%, maintaining excellent profitability; and the gross margin of the comprehensive utilization of waste resources business increased from 5.53% to 6.07%, an increase of 0.54 percentage points over the previous year. In terms of business quality, it benefited from the shortening of the sales repayment period. The company's net cash flow from operating activities in the first half of the year was 1.32 billion yuan, an increase of 111.34% over the previous year.

Shipments of various products grew rapidly, product structure was optimized, production capacity was rationally expanded, and the company's mainstream product capacity utilization rate reached 100% in the first half of 2024. Rational expansion simultaneously achieved strong production and sales.

(1) Tertiary precursors: sales of more than 0.1 million tons, up 45% year on year, and the effective capacity utilization rate reached 100%. High-end products such as medium nickel with high voltage, high nickel, and ultra-high nickel accounted for more than 90% of total shipments; (2) cobalt tetroxide: sales of about 0.0105 million tons, up 163% year on year, and the capacity utilization rate was close to 100%. Among them, innovative products with mixed and high voltage products accounted for more than 70% of total shipments; (3) Cathode materials: sales of about 0.007 million tons, up 133% year on year, becoming 3C ternary High-quality battery brands; (4) Nickel resources: The company's first-phase MHP products were shipped in excess of 0.02 million tons, with a year-on-year increase of 101%, and the capacity utilization rate reached 100%, which is expected to sprint 0.06 million tons throughout the year; (5) Urban mining business: power batteries/cobalt resources/tungsten resources/scrap vehicle recycling businesses are growing steadily.

Deepen industrial chain cooperation and enhance operational stability and certainty

Product market side: In August 2024, the company signed an MoU with ECOPRO BM. In order to meet the new demand in markets such as the US and Europe, ECOPRO BM will purchase 0.265 million tons of precursors from the company from 2025 to 2028. The company's production capacity of 0.05 million tons of high-nickel ternary precursors built in Indonesia will be completed and put into operation in the second half of this year. Currently, all production capacity has been reserved by customers. Resource side: The company reached a strategic cooperation with Indonesian nickel mining giant MDK. MDK will supply no less than 0.075 million tons of nickel per year for the ESG project and the Meiming project over the next 20 years to ensure the long-term strategic supply of nickel ore required for the company's Indonesian nickel resources project.

Profit forecasting and valuation

Maintain profit forecasts and maintain a “buy” rating. Considering the orderly release of the company's production capacity and the gradual reversal of the waste business, we maintained that the company's net profit from 2024-2026 was 1.88, 2.471, and 2.66 billion yuan, respectively. The corresponding EPS was 0.37, 0.48, and 0.52 yuan, respectively, and the corresponding PE was 15, 12, and 11 times, respectively. Maintain a “buy” rating.

Risk warning: Policy implementation falls short of expectations, customer orders fall short of expectations, increased market competition, etc.