\u3000\u3000 Tianqi Lithium Corporation(002466) (002466)
Event overview: on January 26, the company disclosed the performance forecast for 2021. In 2021, the company’s net profit attributable to the parent company was 1.8-2.4 billion yuan, turning losses into profits year-on-year, and deducting the net profit not attributable to the parent company was 1.08-1.6 billion yuan, turning losses into profits year-on-year. Among them, the net profit attributable to the parent company in Q4 in 2021 was RMB 1.27-1.87 billion, turning losses into profits year-on-year, with a significant increase of 186% – 321.2% month on month, deducting the net profit not attributable to the parent company of RMB 1.202-1.722 billion, turning losses into profits year on year and month on month.
Analysis and judgment: sitting on the greenbushes lithium mine, one of the lowest costs in the world, Q4 company has greatly benefited from the rise of lithium price. 1) Price: the prices of lithium concentrate, lithium carbonate and lithium hydroxide, the main products of 21q4 company, rose sharply month on month. According to the Asian metal network, the average prices of lithium concentrate, battery grade lithium carbonate and battery grade lithium hydroxide were $1930 / ton, 208000 yuan / ton and 186000 yuan / ton respectively, up + 126.4%, + 86.2% and + 59.6% respectively. 2) Cost: the company holds the world’s highest quality greenbushes lithium mine, whose cost is at a low level in the world. It is underwritten by the two major shareholders and priced for half a year. Under the sharp rise in the price of lithium concentrate, the company’s cost advantage is prominent. 3) Production and marketing: thanks to the continuous boom in the downstream of lithium, the company’s production and marketing are booming. The sales of main lithium products increased significantly in 2021. 4) Investment income: the company expects that the performance of sqm, an associate, will increase significantly year-on-year in 2021, and confirms that the investment income will increase significantly year-on-year. 5) Non recurring profit and loss: in 2021, the income from changes in fair value generated by sqm’s class B share collar option financing business and the investment income generated by hedging business were about 45 million yuan (net of tax). 6) The amortization of unrecognized financing expenses of the company due to the extension of syndicated M & A loans totaled 609 million yuan, of which the amortization of 21q3 reduced the net profit by 528 million, which is also one of the reasons for the significant increase in Q4 performance.
With a unique layout of global high-quality lithium resources, the company ushered in a harvest period. After years of layout, the company has obtained one of the world’s best lithium and salt lake resources. Although it has experienced the pain brought by huge M & A loans, its resources will enter the rapid expansion of production, and the company is about to enter the harvest period. 1) Greenbushes mine, which owns 26.01% of talison’s equity and one of the lowest costs in the world, has a lithium concentrate production capacity of 1.34 million tons. It is expected to achieve full production in 2022, and the production capacity will be expanded to 1.94 million tons in the next three phases. 2) Participate in 23.75% equity of sqm, one of the best salt lakes in the world, or continue to contribute investment income. Sqm now has a capacity of 120000 tons of lithium carbonate and 21500 tons of lithium hydroxide. It is expected that the capacity will be expanded to 180000 tons of lithium carbonate and 30000 tons of lithium hydroxide in 2022. 3) Zabuye Salt Lake (20%) is one of the best salt lakes in China. The expansion of 12000t LCE in phase II has also been started and is expected to reach production in 2023. 4) It owns 100% interest in Caola lithium mine in Yajiang, with a reserve of 630000 tons of LC, which can be used as reserve resources or to ensure the supply of lithium resources of the company in the future.
Debt, capacity construction and other aspects are improving, and we are optimistic about the accelerated release of the company’s performance. 1) The board of directors of the company has agreed that the profitability of the company may be significantly improved after H shares apply for IPO, long-term H shares raise funds or used for debt repayment. 2) The commissioning of quinana phase I project has been through the whole process, and it is expected to reach the production capacity in 2022, bringing significant increment to the company’s production and marketing. At the same time, quinana phase II and Suining Anju project are also expected to start construction in the future.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 2.166 billion, RMB 8.532 billion and RMB 10.137 billion. Based on the closing price on January 26, 2022, the corresponding PE will be 58x, 15x and 12x respectively. The company will be given a “recommended” rating for the first time.
Risk tip: the demand is less than expected, the lithium price has fallen sharply and its own project is less than expected.
