Event: On March 30, the company released its 2022 annual report. (1) In 2022, the company achieved revenue of 40.45 billion yuan, an increase of 427.8% over the previous year; net profit of 24.13 billion yuan was 24.13 billion yuan, an increase of 1060.5% over the previous year; net profit after deducting non-return mother's net profit was 23.06 billion yuan, an increase of 1628.9% over the previous year. (2) 22Q4 results: 2022Q4 achieved revenue of 15.80 billion yuan, an increase of 316.9% over the previous year, an increase of 52.7% over the previous year; the net profit of the mother was 8.14 billion yuan, an increase of 425.7% over the previous year, an increase of 44.0% over the previous year; after deducting net profit of the non-return mother, an increase of 459.1% over the previous year and an increase of 44.3% over the previous year. (3) It is proposed to distribute a cash dividend of 30 yuan (tax included) for every 10 shares to all shareholders.
Analysis and judgment: With the world's top lithium resources, the deep moat contributed considerable profits to the company. The sharp rise in volume and price led to a significant increase in performance, and the company achieved the best annual performance in history. (1) Volume: Lithium salt production in 2022 was 47262.58 tons, up 8.16% year on year, sales were 58095.28 tons, up 21.77% year on year, inventory volume was 2928.6 tons, up 150.78% year on year. Lithium ore production was 1,349 million tons, up 41.37% year on year, sales were 759,000 tons, up 37.7% year on year, and inventory volume was 296,000 tons, up 51.1% year on year. (2) Price: The average price of lithium salt sold in 2022 was 430,400 yuan/ton, and the average cost was 60,900 yuan/ton. Benefiting from complete self-sufficiency of resources, the cost of lithium salt is low. (3) Subsidiaries and investment income: The total investment income of the company in 2022 was 7.846 billion yuan, of which the participating SQM company received investment income of up to 5.641 billion yuan, and the company's subsidiary Wenfield achieved net profit of 15.24 billion yuan in 2022.
Resources were further consolidated with the acquisition of Essential Metals. The company's holding subsidiary TLEA purchased all of ESS's shares and obtained 100% ownership of the Pioneer Dome lithium mine project, which is located in the core lithium belt of Yilgarn Craton in the gold mining region of eastern Western Australia. The amount of lithium ore resources is 11.2 million tons, and the grade is 1.16%. The total is 12900 tons of lithium oxide equivalent, which is about 318,600 tons of LCE equivalent, which helps expand the company's lithium ore resource reserves.
The “Strategic Plan for the Next Five Years (2023-2027)” was released, with a long-term production capacity of 300,000 tons, highlighting the company's strategic ambitions. (1) In the future, the company will continue to consolidate the upstream lithium resource layout and continue to pay attention to high-quality lithium resource projects around the world with an open and cooperative attitude; (2) steadily implement the company's lithium product expansion plan and strive to reach the production capacity of lithium chemical products equivalent to about 300,000 tons of lithium carbonate by 2027, further exploiting the synergies of the industrial chain. (3) The company will pay close attention to upstream and downstream opportunities in the industrial chain, continuously optimize the company's investment portfolio, and improve the industrial chain layout. The company will continue to strategically lay out new energy materials and next-generation battery technology manufacturers, including solid-state batteries, in the new energy value chain, and develop deeper cooperative relationships with them, such as cooperating in businesses such as precursor production and battery recycling, to focus on investment opportunities in electric vehicles and energy storage applications. (4) Continue to expand the company's global business layout and expand the global customer base; (5) Strengthen R&D capabilities and enhance the core technical reserves of the lithium battery value chain, and the company will continue to adhere to the development direction of “technological transformation”.
Investment suggestion: The company's production capacity continues to expand at a low cost. We assume that the tax-inclusive price of lithium carbonate tons in 2023-2025 will be 25,220,000 yuan. The estimated net profit of the company in 2023-2025 will be 179.2, 164.1, 18.81 billion yuan, and PE corresponding to the closing price on March 31 is 7, 8, 7, maintaining the “recommended” rating.
Risk warning: demand falling short of expectations, sharp drop in lithium prices, risk of own projects falling short of expectations, etc.