Company Overview: The company gradually transformed from an early-stage exploration company to a mineral resource development and utilization company integrating cesium rubidium, lithium and copper through mergers and acquisitions. The company's current revenue and gross profit are mainly contributed by the lithium business. The gross profit of 2024H1's lithium and cesium-rubidium business is 0.57/0.34 billion yuan respectively, accounting for 56% and 34% of the total gross profit. Among them, the gross profit margin of the lithium business is 35.6%, and the gross margin of the cesium-rubidium business is as high as 72.4%.

Lithium: The self-sufficiency rate of lithium ore has increased, and the cost of lithium salt has increased and decreased. The company's lithium business has achieved an integrated layout of extraction, selection and metallurgy, and lithium salt production capacity has expanded rapidly, with a lithium salt production capacity of 0.066 million tons. The Bikita lithium mine in Zimbabwe has an annual production capacity of 0.3 million tons of spodumene concentrate and 300,000 tons of chemical-grade lithium-permeable feldspar concentrate. The Canadian Tanco mine has 0.18 million tons/year ore extraction and production capacity, and the company is completely self-sufficient in lithium resources. The company reduced raw material costs by increasing the self-sufficiency rate of lithium resources and reducing mine electricity costs through the construction of supporting photovoltaic power generation projects and power transmission and transformation projects. The company's cost per ton of lithium salt dropped significantly, from 0.121 million/ton in 2022 to 0.061 million yuan/ton in 2024H1.

Cesium rubidium: Global leader in cesium-rubidium salts, with strong profitability and stability. The company is a leader in the field of cesium rubidium salt fine chemicals. It is the manufacturer with the most complete cesium industry chain in the world. It has the ability to mine, process, produce fine chemical products and provide product technical services. The company has the highest share of cesium resources in the world. Cesium rubidium salt products have pricing power, strong profitability and stability. The company's cesium-rubidium business revenue increased from 0.51 billion yuan in 2020 to 1.12 billion yuan in 2023, the CAGR reached 30%, gross profit increased from 0.33 billion yuan to 0.72 billion yuan, and the CAGR reached 30%. The gross margin of the company's cesium-rubidium business remained around 65% for a long time. Through price increases in the first half of 2024, the gross margin of the cesium-rubidium business reached 72%.

Copper: Complete the acquisition of Kitumba copper mine to create a new growth curve. The company acquired a 65% stake in the Kitumba copper mine in Zambia in 2024 to achieve a copper business layout, which is expected to create new profit points. The total amount of copper resources discovered in the Kitumba copper mine is 27.9 million tons, the amount of copper metal is 0.614 million tons, and the average grade of copper is 2.20%. The company also acquired the Tsumeb copper smelter in Namibia. The tailings are rich in germanium and zinc with high added value.

The advantage of geological exploration is the company's underlying core competitiveness, and mining rights development provides the company with front-end resource guarantees. The company's solid mineral exploration business and mineral rights development business provide the company with a stable front-end resource guarantee. The advantage of geological exploration is the company's underlying core competitiveness, which has achieved a significant increase in Bikita lithium storage. The amount of lithium resources increased from 0.8496 million tons LCE to 2.8847 million tons LCE, an increase of 240%.

Profit forecast and rating: We expect the company's net profit to be 0.71/0.9/1.02 billion yuan in 2024-2026, respectively, with year-on-year growth rates of -67.7%/+26.7%/+13.3%, respectively. The PE corresponding to the current stock price is 40/32/28 times, respectively. We selected lithium ore and lithium salt companies as comparable companies. The average PE for 2024-2026 was 127/30/18 times, respectively. Since the company's acquisition of copper ore created a new profit growth point, it had a valuation premium, and was covered for the first time, giving it an “increase” rating.

Risk warning: the risk that the project progress falls short of expectations; the risk that demand for new energy vehicles falls short of expectations; the risk that lithium prices will continue to decline.