Core views

In 2023, the company achieved revenue of 66.30 billion yuan, +5% year-on-year, net profit of 3.35 billion yuan, -14%; 2024Q1 achieved revenue of 14.96 billion yuan, -22% year-on-year, -2% month-on-month, and net profit of 520-million yuan, -49% year-on-year and +55% month-on-month. In 2023, Huafei Huayue Huake's nickel project successively achieved production, with annual nickel product sales of 126,000 metal tons, achieving rapid growth; in 2023, the company shipped nearly 150,000 tons of cathode precursors, +31% year on year, and shipped about 95,000 tons of cathode materials, +5% year on year. Zimbabwe's Arcadia lithium project was completed and put into operation, and the global integrated layout continued to advance.

occurrences

The company publishes its 2023 annual report and 2024 quarterly report.

In 2023, the company achieved revenue of 66.30 billion yuan, +5% year-on-year, net profit of 3.35 billion yuan, -14% year-on-year, and net profit of 3.09 billion yuan after deduction, -22% year-on-year.

Among them, 2023Q4 revenue was 15.21 billion yuan, +6% YoY, -14% month-on-month, net profit to mother of 340 million yuan, -62% YoY, -64% month-on-month, net profit of 370 million yuan after deducting net profit not returned to mother, -65% YoY, and -59% month-on-month.

2024Q1 achieved revenue of 14.96 billion yuan, -22% year-on-year, -2% month-on-month, net profit of 520 million yuan, -49% year-on-year, +55% month-on-month, net profit of 570 million yuan after deducting net profit of 570 million yuan, -43% year-on-year, and +55% month-on-month.

Brief review

Nickel: Huafei Huayue Huake's nickel projects have successively achieved production, and sales have grown rapidly.

In terms of sales, in 2023, the company sold 126,000 metal-tonnes of nickel products, +88% over the same period last year. The company's electrolytic nickel products were successfully registered as delivery brands on the Shanghai Futures Exchange and the London Metal Exchange.

In terms of production capacity, the nickel projects planned by the company in the early stages have been put into operation one after another, including:

Huafei: Indonesia's 120,000-ton nickel metal hydrometallurgical smelting project began some production lines in June 2023, and production was basically achieved at the end of the first quarter of 2024;? Huayue: The 60,000-ton nickel-metal hydrometallurgical smelting project stabilized production and exceeded production, and the entire SCM slurry pipeline was completed;

Huake: The 45,000-ton high-nickel nickel high-metallurgical nickel project has achieved production.

On the positive side, due to the continued decline in nickel prices in the second half of 2023, the company calculated more asset impairment losses, and profits in the second half of the year (especially Q4) were under pressure.

Lithium: The African project was successfully put into operation, and profits are under pressure in the short term.

In terms of production capacity, the company completed and put into operation the Arcadia lithium mine project in Zimbabwe in Africa, and the lithium carbonate production line for the battery grade lithium salt project with an annual output of 50,000 tons in Guangxi reached production standards in 2024Q1.

In terms of profit, in the short term, due to the rapid decline in lithium prices in 2023, the company calculated impairment losses on some assets, putting pressure on profits. In the long run, the lithium resource layout can guarantee the stability of the supply of raw materials for the lithium battery business.

Lithium battery materials: Profits are under pressure due to declining processing costs in the industry.

In terms of volume, in 2023, the company shipped nearly 150,000 tons of cathode precursors (including ternary precursors and cobalt tetroxide, including internal self-supply), +31%; shipments of cathode materials were about 95,000 tons, +5% compared to the same period. Among them, 8 series and 9 series and above were more than 67,000 tons of high nickel and more than 13,000 tons of lithium cobalate, +32% year over year.

On the customer side, the company's downstream battery customers include LGES, Ningde Times, Volkswagen Guoxuan, Everweft Lithium Energy, Envision AESC, Weilan New Energy, etc.; it also actively explores overseas markets and signs long-term supply agreements with Pohang Chemical and Puhua to strengthen LGES battery chain relationships on the basis of consolidating strategic customers such as LGC, POSCO, and L&F, while entering high-value supply chains such as SDI and Ecopro.

In terms of profit, the company's gross profit margin for the positive pole business in 2023 was 7.8%, -5.5 pct year on year, 18.3% year-on-year, and -2.3 pct year on year. Since the second half of the year, the overall processing fee decline in the industry has declined. Among them, Cathode is calculated based on Chengdu Bamo's net profit of 530,000 yuan per ton, which corresponds to a profit of about 0.56 million yuan/ton per ton per ton, a year-on-year decrease of 10,000 yuan, of which the net profit of Q4 is expected to be 20,000 yuan/ton per ton.

Copper: Quantitative profit is stable, and the rise in copper prices in 2024 is expected to lead to profit elasticity.

In 2023, the company sold 88,000 tons of copper products, -2% over the same period last year. The scale remained stable, and the gross profit margin was 28.6%, achieving stable profits. Starting with 2024Q1, copper prices showed an upward trend. The average price of Changjiang non-ferrous copper 1 #Q2 was 79,600 yuan/ton, an increase of 10,000 yuan over the previous month, and the company's copper business is also expected to benefit.

Cobalt: Shipments are growing steadily, and profits are being pressured by prices.

In 2023, the company shipped about 410,000 tons of cobalt products (including contract processing and internal self-supply), an increase of 12% over the previous year. After the Huayue and Huafei projects were put into operation, the increase in supporting cobalt production capacity led to an increase in shipment volume; the gross profit margin was 8.7%, -17.6pct year on year, mainly under pressure from the decline in cobalt prices.

Profit forecast: The company's net profit for 2024-25 is expected to be 3.55 billion yuan or 4.37 billion yuan, corresponding to 14 or 11 times PE.

Risk analysis

1) Downstream NEV production and sales fall short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, power restrictions, etc., which in turn affects the company's related business shipments and profitability.

2) The rise in raw material prices exceeded expectations: Since 2021, raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, while at the same time disrupting the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.