Event summary: The 2022 semi-annual performance forecast was released on July 9. The company expects the net profit of 2022 H1 to be 400 million yuan to 530 million yuan, an increase of 840.86% to 1146.64% over the previous year; after deducting net profit of the non-return mother of the mother of the mother, a year-on-year increase of 805.74% to 1107.66%.

Analysis and judgment: Lithium salt prices remained high, shipments rose sharply, and the 2022-H1 and Q2 performance increased significantly on a year-on-month basis. Looking at a single quarter, the company expects net profit of 268 million yuan to 398 million yuan in 2022, an increase of 1118.18% to 1707.09% over the previous year, an increase of 103.03% to 201.52%; after deducting net profit of 264 million yuan to 394 million yuan, an increase of 1047.83% to 1613.04% over the previous year, an increase of 109.52% to 212.70% over the previous quarter. Reasons for changes in 22Q2 performance: Price: The average price of lithium salt rose month-on-month in Q2 2022. According to Asian Metal Network data, the average price of industrial grade lithium carbonate Q2 including tax was 445,700 yuan/ton. Compared with 22Q1, up 10.6% month-on-month, the company's lithium concentrate products basically rose at the same time as lithium salt prices. 2) Volume: In the first half of the year, the company expects sales of 6,840.6 tons of lithium concentrate, 198.27 tons of industrial-grade lithium carbonate, and 64,000 tons of chromite, achieving a significant increase.

Entering the supply chain of leading companies such as Ningde Shidai and Shengxin Lithium Energy, sales channels have been opened, and results in the second half of the year can be expected. The company firmly grasped the rising trend in the lithium salt market and actively cultivating new strategic customers. In the first half of 2022, the company successfully entered the supply chain of strategic customers such as Ningde Shidai and Shengxin Lithium Energy, and successfully achieved major customer development. The company's sales model is to produce lithium products at the end of each year and sell them the following year. According to the company's 2021 annual report, the company has an inventory of 11298.69 tons of lithium products. A large number of lithium concentrate products are still available for sale in the second half of the year, and as lithium prices continue to be high, it is expected that the average sales price in the second half of the year will increase sequentially, and the company's performance for the second half of the year and the whole year can be expected.

World-class salt lakes have ushered in accelerated development, and the company can be expected to grow in the future. (1) The construction of the second phase of the Zabye Salt Lake project under the company is underway. It is cooperating with Donghua Technology to build an EPC+O method, and 12,000 tons of lithium carbonate production capacity may be completed and put into operation in 2023. The development of Zabye Salt Lake has accelerated dramatically. According to researchable estimates, the full cost of the second phase project after deducting depreciation and various expenses was 42,500 yuan/ton, and the full cost after deducting by-product revenue reached 24,400 yuan/ton. The cost of lithium extraction was lower than Qinghai Salt Lake, and it was on the left side of the global salt lake lithium extraction cost curve. (2) According to the company's strategic plan, it is planned to invest 2 billion dollars to build 10,000 tons of lithium hydroxide+10,000 tons of electric carbon projects in 2023-2025. It is expected that a lithium salt scale of 3-5 thousand tons will be formed in 2025. The company's future production capacity will expand drastically, and the company can be expected to grow. (3) The company's strategic goal is for its Zabouye lithium industry to produce 5,000 tons of lithium carbonate in 2022, no less than 10,000 tons in 2023, 17,000 tons in 2024, and no less than 30,000 tons in 2025-2026. The plan will be further revised in the future according to the requirements of China's Baowu and autonomous region governments. Moreover, the company's equity incentive plan has been approved by the State Council's State-owned Assets Administration Commission. The interests of the company's management are deeply tied to the company. The future will usher in accelerated development, and the company is expected to benefit significantly from strategic opportunities for lithium resource development in mainland China.

Investment advice: Lithium prices continue to be high, supply and demand will continue to be tight in the future, the company's production expansion is progressing steadily, and performance continues to be released. We adjusted the company's net profit forecast for 2022-2024 to 11.39, 15.84, and 2,505 billion yuan. PE corresponding to the closing price on July 11 was 28, 20, and 12 times, respectively, maintaining the “recommended” rating.

Risk warning: demand falls short of expectations, sharp drop in lithium prices, and risk of own projects falling short of expectations, etc.