The company released its 2022 annual report:
Revenue in 2022 was 2,992 billion yuan, an increase of 225.1% over the previous year; net profit of the mother was 2,440 million yuan, an increase of 3472.9% over the previous year; after deducting net profit of the non-return mother was 2,441 million yuan, an increase of 3754% over the previous year. Among them, Q4 revenue in 2022 was 1,310 billion yuan, an increase of 248.8% over the previous year and an increase of 88.4% over the previous year; the net profit of Guimo was 1,185 billion yuan, an increase of 2776.2% over the previous year and an increase of 74.65% over the previous year; after deducting net profit of non-Gumi's net profit of 1,184 million yuan, an increase of 2915.4% over the previous year, an increase of 73.27% over the previous year.
The gross profit of the concentrate and lithium salt business increased significantly:
In terms of revenue, lithium concentrate, lithium salt, and lithium battery equipment manufacturing in 2022 were 1,335 billion yuan, 1.25 billion yuan, and 404 million yuan respectively, with year-on-year changes of +661%, +182.4%, and +34.9%, accounting for 44.6%, 41.8%, and 13.5% of total operating income in that order. In terms of gross profit, lithium concentrate, lithium salt, and battery equipment manufacturing in 2022 were 1.22 billion yuan, 207 million yuan, and 129 million yuan respectively, with year-on-year changes of +1011.3%, +226.4%, and +54.6%, accounting for 78.3%, 13.3%, and 8.3% of total gross profit in that order.
The output of the lithium ore mining business increased in 2022, and revenue per ton and gross profit increased significantly:
(1) Volume: Lithium ore production and sales in 2022 were 55,300 tons of SC6, in that order, +38.8% and +27.8% compared with the same period last year. According to the announcement, the company's mine officially resumed production on March 8, 2022. Production resumed about 2 weeks earlier than last year, and production did not enter the winter break until early January 2023. The mine's effective production time increased significantly compared to last year, and the increase in production and sales was impressive. (2) Price: In 2022, lithium concentrate achieved sales of 1,393 million yuan. After offsetting unrealized internal transaction profits with associated companies, lithium concentrate revenue was reported at 1,335 million yuan, with an average price of 24,400 yuan/ton (SMM lithium concentrate annual average price of 4,380 US dollars/ton), an increase of 317.8% over the previous year. (3) Cost per ton in 2022, gross profit of about 2,159 yuan/ton, 22,000 yuan/ton.
Equity smelting production capacity may continue to be released. Chengdu Rongjie's investment returns are impressive:
The company currently has a smelting capacity of 0.48 million tons of Changhe Lithium. At the same time, the participating lithium salt company Chengdu Rongjie Lithium (the company holds 40% of the shares) has a planned production capacity of 40,000 tons/year. According to announcements, the first phase of Chengdu Rongjie Lithium's 20,000 tons/year lithium salt project in 2022 has been completed and officially put into operation, with a total of 14,200 tons of lithium salt sold throughout the year. In terms of performance, Changhe Lithium achieved net profit of 125 million yuan in 2022, while Chengdu Rongjie achieved net profit of 3.337 billion yuan, contributing 1,335 billion yuan in investment income to the company, making it the largest source of the company's annual net profit.
The 2.5 million ton mineral processing project in Yuanyangba continues to advance:
In terms of the EIA for the Yuanyangba project, two public participation announcements in the EIA and the revision of the EIA report were completed in 2021; in terms of the EIA planning for the EIA, the Ganzi Economic and Information Technology Bureau published the environmental impact assessment prior to approval in September 2022. After the EIA of the higher-level plan “Kanglu Industrial Concentration Zone Master Plan (2021-2035)” of Ganzi Prefecture of Sichuan Province (2021-2035)” is approved, the EIA for the Yuanyangba project may meet the application acceptance requirements.
Investment advice:
The estimated revenue for 2023-2025 is 2,658 billion, 24.09 billion yuan, and 3,022 billion yuan respectively, and the estimated net profit is 1,497, 1202 and 1,565 billion yuan. The corresponding EPS is 5.76, 4.63, and 6.03 yuan/share, respectively. The current stock price corresponding to PE is 15, 18.6, and 14.3 times. Considering cyclical fluctuations in the lithium industry, the company's performance has declined to a certain extent. In addition, in the main assumption, we consider that 2023-2025 lithium concentrate production will be 70,000, 100,000, and 140,000 tons in that order. Assuming that the Yuanyangba project is effectively released, production may have room for improvement. Overall, the company has good growth, maintains the company's rating as a “buy-A” rating, and adjusts the target price for 6 months to 100 yuan/share.
Risk warning: demand fell short of expectations, lithium prices fluctuated greatly, and project progress fell short of expectations.