Grimmie: A core supplier to the world's new energy industry and a leader in China's circular economy. The company was founded more than 20 years ago and uses the “new energy material manufacturing+urban mining” dual-track driving business. The core products include ternary precursors, cobalt tetroxide, etc. The company's revenue in 2022 was 29.4 billion yuan, up 52.3% year on year, and net profit from the mother in 2022 was 1.3 billion yuan, up 41.3% year on year. The product continues to gain strength, and the gross margin remains stable.

Precursors led the growth of the new energy business, and nickel resource projects provided strategic raw material guarantees. (1) Ternary precursors: As a leader in the ternary precursor industry, the company's technology is at the forefront of the industry. Shipments of 152,300 tons were achieved in 2022, an increase of 67.28% over the previous year. Among them, 8 series and 9 series ultra-high nickel products accounted for more than 75% of shipments, ranking first in the global market. The production capacity in 2023 is 260,000 tons, and production capacity is expected to increase to 500,000 tons in 2026. (2) Cobalt tetroxide: The company is a leading manufacturer in the industry, with sales volume of 14,800 tons in 2022. The current production capacity of cobalt tetroxide is 25,000 tons, and is expected to reach 30,000 tons in 2026. (3) Raw material system construction: The company implements a multi-raw material strategy channel to guarantee the supply of upstream cobalt-nickel raw materials. In 2022, the production line for the 30,000-ton metallic nickel/year project of the first phase of Grimmie Indonesia's Qingmeibang Nickel Resources project was successfully completed and officially put into operation. The second phase of the 43,000-ton metallic nickel/year project is under construction.

The recycling business has broad room for growth, and power batteries provide new opportunities for the company to develop. (1) Power battery recycling: The company has a leading competitive advantage in the power battery recycling industry, cooperates closely with downstream car manufacturers and battery manufacturers, and has successfully built a full life cycle value chain for new energy. In 2022, the company's power battery recycling volume reached 17,400 tons, an increase of 98.1% over the previous year. The company expects to reach more than 35,000 tons in 2023 and more than 300,000 tons in 2026, becoming the growth pole of the company's performance. (2) Recycling of end-of-life vehicles: The company's comprehensive utilization of end-of-life vehicles increased steadily, reaching 218,000 tons in 2022. Among them, recycling of new energy vehicles will become a new growth point for this business. (3) Electronic waste recycling: The company is a leader in the electronic waste industry, forming a recycling value chain of “electronic waste recycling and dismantling - waste plastic recycling - metal recycling” to achieve a three-track drive. (4) Tungsten recycling: The company and the world's leading enterprises have established a targeted recycling system for tungsten resources. At the same time, “green tungsten resources” will further promote the company's tungsten recycling volume. The total amount of tungsten recovered in 2022 reached 4,291 tons, an increase of 9.41% over the previous year. There is plenty of room for future growth.

Profit forecast and valuation: As the company continues to consolidate the advantages of the whole industry chain integrating new energy materials manufacturing and recycling business, deepens upstream and downstream cooperation, and continues to expand production capacity, the company's 2023-2025 revenue is expected to be 268.52/314.80/37.102 billion yuan respectively, and net profit is 11.46/16.05/1,952 billion yuan, corresponding to PE26.63/19.01/15.63 times, and was given a “buy” rating for the first time.

Risk warning: the company's production capacity expansion falls short of expectations; downstream demand for new energy falls short of expectations; industry competition intensifies