Incident: The company released the first quarter report of 2023. In Q1 of 2023, the company achieved revenue of 11.499 billion yuan, +117.77% year on year, and the company achieved net profit of 4.875 billion yuan, +46.49% year on year, -40.1% month on month, and the decline in Q1 performance was below the industry average of -53%.
Comment: Q1 2023 single-quarter gross margin reached a record high. The year-on-year increase in the company's performance was mainly due to (1) the average sales price of the company's lithium compounds and derivatives and lithium ore, which increased by 40.47% and 245.09%, respectively, compared to the same period of the previous year; (2) according to Bloomberg's forecast, the company's affiliate SQM's performance for the first quarter of 2023 will increase significantly year-on-year, corresponding to increased investment income. The average domestic Q1 lithium carbonate import price in 2023 was about 67393 US dollars/ton, +297.8% year on year.
The lithium salt production capacity guide reached 300,000 tons in 2027, and the leading position in the industry is highlighted: by the end of 2022, the company's lithium chemical products had a built-up capacity of 68,800 tons. Furthermore, the company is building a 20,000 ton battery-grade lithium carbonate project in Anju, Sichuan, and plans to restart the second phase of the Quinana plant's 24,000-ton battery-grade lithium hydroxide project, further increasing the company's mid-term lithium chemical product production capacity to over 110,000 tons/year. According to the company's strategic plan for the next 5 years, it will strive to reach 300,000 tons of LCE production capacity in 2027. On the resource side, Terlison lithium concentrate has a completed production capacity of 1.62 million tons/year. The planned production capacity will exceed 2.1 million tons/year after the chemical grade 3 processing plant is put into operation by 2025. In the future, Greenbush also plans to build a chemical-grade 4 processing plant to further expand lithium concentrate production capacity.
Industrial carbon prices rose for the first time in 23 weeks, and downstream production continued to increase month-on-month in 2023. According to WIND data, as of April 27, 2023, the price of industrial grade lithium carbonate was 138,400 yuan/ton, up 1.98% from last week, the first increase in nearly 23 weeks. In March 2023, domestic production of lithium iron phosphate power batteries and ternary power batteries was 32892 MWh and 18226.8 MWh respectively, up 22.7% and 25.2%, respectively, and maintained positive year-on-month growth during the year.
Bind leading battery companies and improve the new downstream layout of the industrial chain. The company and China Innovation Aviation signed a “Strategic Partnership Agreement”. The two sides decided to join hands to carry out joint investment and cooperative R&D cooperation in various fields such as battery cells and battery materials, new materials, lithium salt, lithium ore, etc.; Tianqi Chuang Lithium, a wholly-owned subsidiary of the company, signed a “Cooperation Agreement” with Beijing Weilan to jointly fund the establishment of a joint venture to jointly engage in R&D, production and sales of pre-lithiated manufacturing equipment products.
Profit forecast and rating: In view of the recent decline in lithium carbonate prices and lithium hydroxide prices, we lowered our profit forecast. We expect the 2023-2025 EPS to be 12.52 yuan/10.99 yuan/11.59 yuan respectively, down 7.8%/7.7%/0.2% respectively. The corresponding 2023-2025PE is 6X/6X. In view of the company's leading position in the global industry and the gradual improvement of its capital structure, we maintain the “increase in holdings” rating.
Risk warning: downstream demand falls short of expectations; supply-side production capacity in the industry is being released too quickly; company project construction falls short of expectations; safety and environmental risks; risks of overseas operations; risk of changes in technology paths, etc.