Main points of investment
Lithium chromium resources double bibcock, close look at chromium and far look at lithium
The company is based on Tibet Luobusa Chrome Mine and Zabuye Salt Lake and other high-quality mines, engaged in chromium mining, salt lake lithium extraction, Tibet's state-owned mining development of the only listing platform. At present, it has a production capacity of 60,000 tons / year of chromite and 8000 tons / year of lithium ore. The 100,000 tons / year chromium ore project is expected to be put into production in 2017 (may be delayed), while the construction of 18000 million tons / year lithium ore production line is delayed due to technical problems. 2016H's operating income was 275 million yuan, down-34% from the same period last year, mainly due to a sharp decline in product output. Among them, the income of chromium and lithium products is 60 million yuan and 125 million yuan respectively, accounting for 22% and 45% of the business income respectively, which is the main source of income of the company. The net profit of 2016H was 40 million yuan, up 171% from the same period last year, mainly due to the increase in gross profit due to the high prices of lithium carbonate and chromium ore. The gross profit of 2016H lithium and chromium products is 11 million yuan and 89 million yuan respectively, accounting for 10% and 83% of the total gross profit, which is the main source of profits of the company.
Lithium: have the best resources and wait for technological breakthroughs
The company has the largest lithium reserves (1.53 million tons), the highest average lithium concentration (0.12%) and the lowest magnesium-lithium ratio (0.008) in Zabuye Salt Lake, but it is difficult to exploit because it is located in high altitude areas. It has 8000 tons / year lithium ore using solar pond concentration method, 2000 tons / year lithium carbonate and 2000 tons / year lithium hydroxide production capacity, which is still not up to production. The solar pond concentration method is still used in the second phase of 18000 t / a lithium mine project and its supporting projects. at present, the process is being further optimized and construction is temporarily suspended. However, as the price of lithium carbonate remains high at 110,000 yuan per ton, although the output dropped in the first half of the year, the profit situation is good. We believe that once the large-scale low-cost salt lake lithium extraction technology breakthrough, the company's performance growth space is huge.
Chromium copper: chromium price rebounds but output shrinks, the prospect of 100000 tons / year chromium ore project is optimistic, the company is based on Luobusa chromium mine, has 60,000 tons / year chromium mineral energy, is the largest chromium mine in China.
It has a production capacity of 1500 tons / year of electrolytic copper and 5000 tons / year of electrolytic copper and its supporting capacity has been delayed due to the decline of copper price and the low grade of copper ore. The fixed increase of 469 million yuan raised by the company for the 100,000 tons / year chromite development project has been completed. The developed chromite of 0.702 square kilometers in the south of Luobusa I and II ore group has large chromite reserves (1.7 million tons) and high grade (47.41%). The project is scheduled to be put into production in 2017 and reach production in 2018. According to the feasibility report, the annual net profit will reach 84.72 million yuan after reaching production.
As of October 17, the price increase of South African Cr44% chromium concentrate powder in Shanghai Port has risen to 51 yuan per tonnage, up 59% from the same period last year and 104% from the beginning of the year. Chrome ore is mainly used in the production of ferrochromium and 90% is used in the production of stainless steel industry. China's production increased by 8% in the first half of 2016, which was the main reason for the increase in demand and prices for chromium ore. In 2015, the global output of chromium ore reached 31 million tons, while China produced only 12-150000 tons, and imported 10.4 million tons of chromium ore. We believe that the supply of chromium ore will continue to be tight in 2016, and the price segment is still strong. However, the slowdown in stainless steel production growth will lead to a slowdown in chromium demand, and there will be long-term pullback pressure in prices.
Profit forecast and valuation: investment rating "buy", target price "22 yuan per share"
Based on the assumption that the output of 2016E/2017E/2018E chromium ore is 20 000 t / 20 000 t / 50 000 t and the output of lithium ore is 2000 t / 3000 t / 3000 t respectively, it is estimated that the attributable net profit of 2016E/2017E/2018E of the company is 48 million yuan / 71 million yuan / 136 million yuan respectively, the corresponding EPS is 0.09 yuan / 0.14 yuan / 0.26 yuan, and the corresponding BPS is 4.13 yuan / 4.27 yuan / 4.53 yuan respectively. Using PB valuation, corresponding to 2017 5.16 times PB, the target price is "22 yuan per share", and the investment rating is "buy".
Risk hint
The output of lithium chromium is not as expected, the price callback of lithium chromium is higher than expected, and the production of chromium project is not as expected.