Event: announced on the evening of February 27, Hong Kong Hailiang, a wholly-owned subsidiary, plans to jointly finance the construction of a high-performance electrolytic copper foil project with an annual output of 100000 tons in Jipai Park, Indonesia. Hong Kong Hailiang and company hold 90% and 10% respectively. The total investment of the project is 5.9 billion yuan, and the funds come from the company's own funds or other self-raised funds.
Project schedule: the project will be built in two phases, each with 50,000 tons. The first phase of the project is scheduled to be completed from 2023 to 2025, and the second phase is planned to be completed from 2025 to 2027.
The Indonesian project aims to radiate the European and American markets and compete with global copper foil enterprises. The current battery planning in Europe and the United States corresponds to more than 2 million tons of copper foil demand, but the local lithium copper foil production capacity in Europe and the United States is relatively scarce, the production capacity scale and expansion pace of Japanese and South Korean enterprises are slow, and Chinese exports face high tariffs (5.2% of the European Union and 26.3% of the United States). The Indonesian project will give full play to the company's international business advantages and rich experience in building overseas factories, speed up the international layout of copper foil, seize the markets in Europe, the United States and Southeast Asia, and quickly increase its market share.
With the Chinese battery going out, the company's scarce international operating capacity is favored. The export of Chinese batteries to the United States needs to be increased by 25% on top of 2.7%. Chinese head battery factories are in urgent need of copper foil enterprises with overseas supporting capacity construction capacity. At the same time, the omni-directional cooperation between the company and the head battery factory will enhance the stickiness of the company and downstream customers, and also help to speed up the customer certification and shipment of the domestic base.
Copper foil industry: face the surplus, not afraid of competition. The company announcement clearly believes that the domestic copper foil market competition intensifies, profitability shows a downward trend. We believe that, on the one hand, the company has developed a strong scale reduction and market development ability in the highly competitive copper tube industry, giving the company the determination to face the competition and stand out in the copper foil industry; on the other hand, drawing lessons from the experience and market resources of copper tube international market development, Indonesian projects can also avoid the market risks brought by fierce domestic competition to a certain extent.
Make clear the strategic goal of the company's copper foil development: short-term goal: speed up the domestic production capacity planning of 150000 tons, build a global operation mode; medium-term goal: three years to become the top three in the industry; long-term goal: to grow into the head of the industry, occupy an important position in the field of new energy materials.
Full experience has been accumulated in the commissioning of the domestic Gansu project, and the head customers such as CATL and BYD will be supplied in bulk in the second quarter. The first phase of Gansu Hailiang high-performance copper foil project with an annual output of 150000 tons will be put into production in the first quarter of 2023. At present, customers such as Honeycomb Energy and Polyfluorodo have achieved batch supply, while Ningde Times and BYD are expected to achieve batch supply in the second quarter of 2023. Hailiang new materials in the technology, market and other aspects have accumulated some experience, the rapid growth of the management team, with the ability to continue to copy and expand.
Profit forecast: after the completion of the transformation of the fifth-generation copper pipe line by the end of 2024, the company will reduce the cost by 700 yuan per ton, enhance the company's profit space and order advantage, and continue to increase its market share; the global layout of copper foil will contribute to profit elasticity immediately. We estimate that the return net profit of the company from 2022 to 2024 will be 2.57 billion yuan, respectively, and the corresponding PE will be 21.0, 13.3 and 9.5 times, respectively, maintaining the "buy" rating.
Risk hint: the risk of rapid decline in copper foil processing fees; the project progress is not as expected.