Key points of investment
Lithium prices have plummeted, and the company's profits have been compressed. In 2023, net profit due to mother is expected to be between RMB 70,000-80,000, a year-on-year decrease of 85.59%-87.39%. Net profit after deducting non-recurring profit and loss is RMB 135-195 million, a year-on-year decrease of 96.48%-97.65%. Net profit due to mother for 2023Q4 is estimated to be -295 million yuan to -395 million yuan, after deducting non-net profit of -280 million yuan to -345 million yuan.
The decline in the company's performance was mainly affected by the market environment in the lithium battery new energy industry. The price of lithium salt dropped sharply, costs rose year-on-year, and the profit margin of lithium salt products was compressed.
The built production capacity was 77,000 tons, and the planned project reached 142,000 tons. The company has now built a lithium salt production capacity of 77,000 tons, of which Zhiyuan Lithium, located in Deyang, Sichuan, has an annual production capacity of 42,000 tons, and a production capacity of 30,000 tons for the new year in Suining, Shehong, Sichuan. The first phase of Shengxin Metal's 10,000 ton lithium salt project planned by the company in Shehong, Sichuan has a production capacity of 5,000 tons and has now been put into trial production. The company has also planned a 60,000-ton lithium salt project in Indonesia. Currently, all work is progressing in an orderly manner, and it is expected to be completed and put into operation in the first half of 2024. In terms of lithium metal, Shengwei Lithium plans to produce 1,000 tons of lithium metal per year. Currently, it has built a production capacity of 500 tons, and the remaining production capacity is under active construction.
Lithium resource projects have been deployed one after another around the world: (1) Oino Mining has mining rights for the Yelonggou lithium polymetallic mine in Jinchuan County in the western Sichuan region. Among them, the Yelonggou project was put into operation in November 2019, with a raw ore production scale of 405,000 tons/year, equivalent to about 75,000 tons/year of lithium concentrate. The Taiyanghekou lithium polymetallic mine is currently in the prospecting rights stage; (2) Max Mind Zimbabwe's Sabixing lithium and tantalum mine project in Zimbabwe entered trial production in May 2023. Scale 90 10,000 tons/year, equivalent to about 200,000 tons/year of lithium concentrate; (3) The company has the SDLA Salt Lake Project in Argentina with an annual production capacity of 2,500 tons of lithium carbonate equivalent; the company will launch a pilot production line for lithium chloride crystals with an annual production capacity of 2,000 tons of lithium carbonate equivalent in Pocitos Salt Lake in Argentina.
Wood velvet has millions of tons of lithium oxide resources, helping Shengxin improve the self-sufficiency rate of raw materials. On January 18, 2024, according to CCTV reports, China has already discovered nearly one million tons of lithium resources in Yajiang, Sichuan. It is the largest pegmatite-type monomer lithium mine discovered in Asia so far. According to the Beijing News Shell Finance Report, the mine is a wood velvet mine, and on January 21, Shengxin Lithium Energy replied that it holds a total of 48.06% of its shares. According to the “'Sichuan Yajiang County Mulong Mining Area Lithium Ore Exploration Report” issued by the Sichuan Mineral Resources Reserve Assessment Center in August 2023, the total proven resource situation of ore bodies IX and II within the lithium ore prospecting rights in the Mu Velvet Mining Area is as follows:
(Discovery+Control+Inference) Li2O (lithium oxide) 989.63 million tons, average grade 1.62%.
Profit forecasting
The company's net profit for 2023/2024/2025 is estimated to be 756/12.79/1,621 million yuan, the corresponding EPS is 0.82/1.39/1.76 yuan, and the corresponding PE is 24.64/14.57/11.50 times. Maintain a “buy” rating.
Risk warning:
Downstream demand falls short of expectations, project expansion falls short of expectations, and risks such as a sharp drop in lithium prices.