\u3000\u3000 Shenzhen Fluence Technology Plc(300647) (300647)
Event:
The company released the performance forecast for 2021 on January 28. It is estimated that the net profit attributable to shareholders of Listed Companies in 2021 will be 127.5-172.5 million yuan, and the net profit after deducting non recurring profits and losses will be 133-181 million yuan.
The company also announced that it plans to invest 5 billion yuan (including 3.5 billion yuan in fixed assets) to build a production base for key materials of lithium battery cathode in the metallurgical material processing zone of Mengzi economic and Technological Development Zone. The project land is about 800 mu, and build a production line for waste lithium battery cells and electrode materials with an annual processing capacity of 45000 tons of metal, with an annual output of 60000 tons of precursors, 20000 tons of lithium carbonate An annual output of 20000 tons of cathode material production line, etc. The construction period of the project is 4 years and is divided into three phases.
Among them, the total investment of phase I project is RMB 900 million (including fixed asset investment of RMB 600 million), and the production line of waste lithium batteries and electrode materials with an annual processing capacity of 11000 tons of metal will be constructed, with an annual output of 15000 tons of precursors, 5000 tons of lithium carbonate and 10000 tons of cathode materials.
Report core view
Provision: reduce the historical burden of low value-added channel end of LED lighting, expand production: actively create a large-scale strategic layout of lithium cathode materials
It is easy to see that the loss of more than RMB 100 million in the forecast is mainly the provision for goodwill impairment of Zhejiang jiongda and CIC optoelectronics acquired in 2017 and 2018, totaling RMB 79 million; The credit impairment is about 36 million yuan; These two items reached about 115 million, and others were also affected by the increase of period expenses of about 40 million year-on-year. It is easy to see that the bad debt loss and goodwill impairment mainly come from the traditional channel direction of LED lighting. This direction has limited room for advanced growth. It is obviously not the main body in the future development of Shenzhen Fluence Technology Plc(300647) . Clearing and withdrawing its negative impact at this stage is also for the normal growth of the subsequent main business to be reflected on the statement side smoothly and will no longer be dragged down by these historical burdens.
In addition to the performance forecast, the production expansion announcement of the company’s investment and construction of the production base of lithium battery cathode key materials in Mengzi is the top priority of our discussion this time, because on the one hand, this production expansion confirms the importance of listed companies to the development direction of lithium battery cathode materials, On the other hand, it also gives a reference that can be compared with other excellent listed companies in the same industry in terms of growth volume.
Shengbihe: an important bridgehead towards the key materials of lithium battery cathode
Shengbihe is a lithium battery key material company acquired by the company in 2018 and gradually completed the holding. It is one of the first high-tech enterprises in China to enter the research, production and sales of lithium-ion battery materials. Its main business includes the recycling of waste battery resources, precursor products, design and manufacturing of lithium-ion battery cathode materials and core equipment.
Under the current industry background of rising prices of raw materials in the upstream of lithium batteries and short supply, shengbihe, a company with the ability of whole process closed-loop, will be very competitive, because the upstream of the company comes from the treatment of waste batteries rather than traditional lithium minerals, and products from precursors to lithium carbonate, cathode materials and so on can be self-made, It is basically not affected by the supply and price fluctuation of upstream mineral products. In order to compete for material resources in the out of stock environment, downstream battery manufacturers will basically pre lock the production capacity in advance, and the prepayment proportion of procurement is very high. Therefore, shengbihe’s growth is very certain. In this announcement, the company will invest heavily in expanding the production capacity in the fields related to lithium battery cathode materials. It is simply estimated that even after the first phase of the project is completed, it is expected to increase the sales scale of about 2 billion. The future growth path and incremental iteration of shengbihe are very clear.
Considering the advantages of shengbihe’s recycling mode and the continuous layout and expansion space in the field of lithium battery materials, including the replicability of its technical path, we judge that Shenzhen Fluence Technology Plc(300647) even if we only look at the growth space of shengbihe, we take the development track of Gem Co.Ltd(002340) , Zhongwei, rongbai and other companies in the industry as a reference, The current market value of more than 3 billion listed companies is obviously underestimated.
Advanced traditional business: heat dissipation devices broaden emerging application fields; Traditional LED lighting gradually shrinks and focuses on high-power applications, and the road ahead is still broad and promising
The traditional products of Shenzhen Fluence Technology Plc(300647) are PC radiators, LED lighting and heat dissipation devices. Relying on the advantages of mature heat dissipation technology and industrial design, the company will continue to consolidate its traditional business and actively focus on developing emerging heat dissipation devices (miniaturization and high-efficiency transmission) of mobile phone smart terminals, AR / VR, large servers and computing facilities, 5g base stations (industrial, high power and high heat), Emerging heat dissipation application fields such as new energy vehicles and high-capacity batteries (power, energy storage and other long cycle, medium and high power) continue to broaden the company’s growth margin.
The company’s annual performance forecast loss in 2021. According to the company’s announcement, the goodwill impairment of Hangzhou jiongda and CIC Optoelectronics in LED related business areas and the credit impairment for bad debt losses are accrued in the annual report. Obviously, the company has fully recognized the bottle neck of traditional LED lighting business and will gradually shrink the low value-added ordinary LED lighting channel business in the future, Focus on the direction of high-power LED products that can give full play to the advantages of the company’s radiator parts, reduce the burden of loss, give full play to the advantages of the company in the design and manufacturing of heat dissipation industry according to the situation, get rid of the low value-added competition trap of LED engineering and channels, improve profitability and return to the main growth track.
Profit forecast and rating: first coverage, buy rating. Through the performance forecast and the announcement of cathode material expansion years ago, based on the traditional heat dissipation devices, the company gradually shrinks the low value-added business of LED traditional lighting, deeply cultivates the emerging heat dissipation application fields such as 5g base station, intelligent terminal, power vehicle and energy storage, and takes the subsidiary shengbihe as the trust to switch the business focus to the key materials of lithium battery cathode rhythmically, The development path of gradually realizing the large-scale strategic layout of corresponding fields has been very clear. We estimate that the company’s profits from 2021 to 2023 will be -148 million yuan, 67 million yuan and 159 million yuan respectively, and the corresponding valuations of the current market value are -24.80 times, 54.54 times and 23.11 times respectively, giving the company a buy rating.
Risk tips: (1) the production expansion progress of lithium battery cathode materials of the company is less than expected; (2) The price of upstream and downstream materials fluctuated sharply, resulting in changes in the company’s growth assumptions; (3) Traditional LED lighting business dragged down more than expected, resulting in continued losses in local businesses; (4) Industry competition intensifies.
