The company released the three-quarter report of 2022, with a profit of 4.36 billion yuan in the first three quarters, an increase of 180.65% over the same period last year. The company's lithium battery material shipments are growing rapidly, and the full-year performance is expected to increase high, maintaining the overweight rating.

Support the main points of rating

Profits in the first three quarters of 2022 increased by 180.65% over the same period last year, in line with expectations: the company released its third quarterly report in 2022, making a profit of 4.36 billion yuan in the first three quarters, an increase of 180.65% over the same period last year, and deducting 4.255 billion yuan in non-profit, an increase of 181.68% over the same period last year. Among them, the profit in the third quarter of 2022 was 1.454 billion yuan, up 88.61% and 3.25% respectively compared with the same period last year; the non-profit was deducted from 1.368 billion yuan, an increase of 83.80% over the same period last year and a decrease of 1.71% from the previous month. The company previously issued a performance notice, expected to achieve a profit of 42.60-4.46 billion yuan in the first three quarters, an increase of 174.19-187.06% over the same period last year. The company's performance is in line with expectations.

Lithium battery material shipments have increased significantly, and the overall gross profit margin is under pressure: the company has benefited from the rapid development of the new energy vehicle industry, and electrolyte shipments have increased significantly. We expect electrolyte shipments of about 180000 tons in the first three quarters. Among them, shipments in the third quarter were about 90,000 tons, a sharp increase of 50% compared with the previous quarter. The company adheres to the integrated layout, and the self-supply proportion of lithium hexafluorophosphate and LiFSI, the key raw materials of the electrolyte, is gradually increased to 90% and 70%, which is beneficial for the company to maintain its cost advantage. In addition, the company's overall gross profit margin in the first three quarters was 40.50%, of which the gross profit margin in the third quarter was 36.17%, down 5.89 percentage points from the previous quarter. With the further increase in the proportion of self-supply of key raw materials, gross profit margin is expected to return to the normal level.

With the rapid development of iron phosphate business, the operating net cash flow has increased significantly: the company's iron phosphate business has achieved rapid development, with shipments of about 20,000 tons in the first three quarters. With the launch of capacity in Yichang, shipments for the whole year are expected to reach 50,000 tons, an increase of about 100%. The company's net operating cash flow increased significantly, with a net operating cash flow of 2.343 billion yuan in the first three quarters, a substantial increase of 136.86% over the same period last year.

Valuation

Under the current equity, combined with the company's quarterly report for 2022-2024 and industry changes, we adjust the company's earnings per share forecast for the period from 2022 to 2024 to 3.01 earnings per share (the original forecast diluted earnings per share is 3.11 pounds 3.56 pounds 4.26 yuan), corresponding to a price-to-earnings ratio of 14.1, 11.9 pounds, 10.0 times; maintain the overweight rating.

Main risks faced by rating

Price competition exceeded expectations; the demand for new energy vehicles fell short of expectations; the release of new production capacity fell short of expectations; new product research and development fell short of expectations; the impact of COVID-19 's epidemic exceeded expectations.