Incidents:
1) The company released its 2023 annual report. In 2023, the company achieved operating income of 6.013 billion yuan, a year-on-year decrease of 25.22%; net profit to mother of 2,808 billion yuan, a year-on-year decrease of 32.98%; net profit after deducting non-return to mother was 2,130 billion yuan, a year-on-year decrease of 33.86%.
2) The company released its report for the first quarter of 2024. In 2024 Q1, the company achieved operating income of 1,127 million yuan, a year-on-year decrease of 45.63%; net profit to mother was 256 million yuan, a year-on-year decrease of 76.63%; and net profit after deducting non-return to mother was 228 million yuan, a year-on-year decrease of 79.32%.
The Bikita project was put into operation as scheduled, and the lithium mine self-sufficiency rate continued to increase, and the “Bikita lithium mine 2 million tons/year (lithium permeable feldspar) construction project” and the “Bikita lithium mine 2 million tons/year (lithium permeable feldspar) renovation and expansion project” were officially put into trial production in July 2023. The two projects produced about 300,000 tons of spodumene concentrate and 300,000 tons of chemical-grade lithium permeable feldspar concentrate respectively. On November 9, 2023, the above two projects met production standards. The company's high-purity lithium salt project with an annual output of 35,000 tons was started and put into operation in November 2023, and production standards were met in February 2024. As of April 2024, the company has a total mineral processing capacity of 4.18 million tons/year and 66,000 tons/year of battery-grade lithium salt production capacity. In 2023, the company's own mines achieved a total production of 15,771.91 tons of lithium salt, and the self-sufficiency rate increased from 21% in 2022 to 86% in 2023.
The gross margin of lithium salt increased year-on-year in '23, and the results of cost reduction and efficiency are beginning to show that the company reduced lithium concentrate production costs by adjusting the raw material product structure, building photovoltaic power plants, and expanding municipal power supply capacity. In May 2023, the company invested in the construction of a 132KV power transmission and transformation project in Zimbabwe through the PPP model, connecting the TOKWE330KV substation in Zimbabwe to the Bikita mine. The one-time transmission was successful on March 17, 2024, which will improve the power guarantee conditions at the Bikita mine and is expected to reduce production costs. In the fourth quarter of 2023, the company invested in the construction of a supporting photovoltaic power generation project at the Bikita mine, with a design capacity of 21 million kilowatts per year. In 2023, the company's lithium battery new energy raw material development and utilization business achieved a gross profit margin of 57.78%, an increase of 3.99 pcts over the previous year.
The volume and price of cesium-rubidium business has risen sharply, and the application market continues to expand
The company's rare light metals (cesium-rubidium salt) segment achieved operating revenue of 1,124 million yuan and gross profit of 724 million yuan.
Among the segments, the application scenarios of cesium-rubidium salt fine chemical business continued to expand, and the market size and sales price continued to increase; in 2023, the company's total sales volume was 999.23 tons, up 25.92% year on year; operating income was 704 million yuan, up 43.95% year on year; gross profit was 493 million yuan, up 44.29% year on year.
Profit Forecasts, Valuations, and Ratings
As the 2024 lithium oversupply pattern may continue, lithium prices are in a state of continuous decline. We lowered our profit forecast. The company's net profit for 2024-2026 is estimated to be 13.39/19.88/25.42 billion yuan (previous value: 26.60/36.35/-) billion yuan, respectively, and EPS of 1.84/2.72/3.48 yuan, respectively. We gave the company 25 times PE in 2024, with a target price of 45.9 yuan, maintaining a “buy” rating.
Risk warning: risk of macroeconomic fluctuations; risk of large fluctuations in non-ferrous metal prices; risk of project construction progress falling short of expectations; risk of exchange rate fluctuations.