Event: the company disclosed its semi-annual report of 2021, with revenue of 1.365 billion yuan in the first half of 2021, + 50.02% year-on-year, net profit of 181 million yuan, + 6442.29%, and deduction of non-net profit of 158 million yuan, + 34706.99%.

Lithium salt business broke out, motor business is sound. 1) the revenue of lithium plate is expanding rapidly. 2021H1's lithium carbonate revenue is + 251.6% year-on-year, which is the main driving force for the company's high performance, mainly due to strong downstream demand, lithium carbonate production release, and rising prices. The proportion of lithium carbonate revenue increased by 18.5pct to 32.2% compared with the same period last year, and the company's business focus gradually shifted to lithium plate; motor business revenue was + 17% year-on-year, achieving steady expansion. 2) the profitability of the company has improved significantly. Affected by the increase in the price of upstream raw materials, the company's traditional motor / servo motor gross profit margin fell 5.2/6.6pct to 23.9% 16.9% respectively. However, the gross profit margin of lithium carbonate business rose 82.7pct to 27.7%, mainly due to the sharp increase in the price of lithium carbonate. At the same time, the company owned its own mines to control the cost of raw materials, and a number of measures were taken to improve efficiency and reduce costs during the reporting period (such as the technical reform of the previous stage of roasting to improve the recovery rate and reduce the cost of using natural gas). Overall, the company's overall gross profit margin / net profit margin increased to 24.2% 13.3% compared with the same period last year. Profitability is significantly boosted.

Resource advantage + capacity expansion, the company's lithium plate performance is expected to continue to increase. 1) Resource advantage: the company has 2 mining rights and 5 exploration rights in Yichun lithium porcelain stone mine, and the total amount of lithium ore resources held / controlled is more than 100 million tons, and lithium mica can be extracted as raw material by mining its own lithium porcelain stone ore. at present, the comprehensive cost of processing lithium carbonate using its own ore source can be controlled at about 45000 yuan per ton. 2) capacity expansion: the company has two lithium mica lithium carbonate production lines with a total annual production capacity of 15000 tons, and a spodumene production line with an annual production capacity of 15000 tons. A spodumene production line with an annual capacity of 10,000 tons of lithium hydroxide + 5000 tons of lithium carbonate (under construction), and mica compatible transformation of the spodumene lithium production line in 2021, and then the lithium salt sales of the company is expected to continue to grow.

The contradiction between supply and demand is prominent, and the price of lithium can be expected. In the future, the two high-growth tracks of electric vehicles and energy storage will lead to the continuous expansion of lithium demand, while the mainstream lithium supply increment is limited. It is expected that the supply and demand of lithium industry will continue to tighten in the next three years. In the short term, with the arrival of the peak season of electric cars in the second half of the year, demand continues to strengthen month-on-month, while there is almost no increase in supply in the second half of the year, and the certainty of rising lithium prices is strong, which is expected to promote the company's performance to continue to release.

Profit forecast and investment suggestion: it is estimated that the net profit of 2023 will be 6.5 yuan 16.4 / 2.06 billion yuan in 2023. Taking into account the rising momentum of the lithium industry and the company's capacity expansion, the company was given an "overweight" rating.

Risk hint: the production progress of production capacity is not as expected and the downstream demand is not as expected.