\u3000\u3000 Sichuan Yahua Industrial Group Co.Ltd(002497) (002497)
Event overview: Recently, the company released the performance express of 2021 and the performance forecast of the first quarter of 2022. In 2021, the company achieved an operating revenue of 5.233 billion yuan, a year-on-year increase of 61.0%, and a net profit attributable to the parent company of 925 million yuan, a year-on-year increase of 185.5%. In 2022, Q1 company is expected to realize a net profit attributable to the parent company of RMB 900-1.2 billion, with a significant year-on-year increase of 1053.7% – 1438.2%.
Lithium salt prices accelerated, production capacity continued to release, and Q1 performance increased significantly month on month. In a single quarter, 21q4 achieved an operating revenue of 1.787 billion yuan and a net profit attributable to the parent company of 293 million yuan, an increase of 35.3% and – 3.0% respectively month on month; 22q1 net profit attributable to parent company increased significantly by 207.2% – 309.6% month on month compared with Q4, significantly exceeding our previous expectations. 22q1 performance change reasons: 1) price rise: Q1 lithium salt price rose sharply month on month in 2022. According to SMM data, as of February 21, the average prices of lithium carbonate and lithium hydroxide increased by 69.8% and 52.6% respectively compared with 21q4, while the price of raw material lithium concentrate increased by only 48.1%. The price rise of lithium salt LED that of lithium concentrate, which led to a significant increase in the profitability of smelting link; 2) Increase in sales: the company seized the opportunity of lithium salt industry, released production capacity and increased lithium salt sales; 3) The civil explosive business continued to make progress while maintaining stability, and the performance increased steadily.
Deeply bind high-quality downstream customers, and steadily expand lithium hydroxide production capacity. 1) In 2021, the company has 43000 tons of lithium salt production capacity, including 33000 tons of lithium hydroxide production capacity, 50000 tons of battery grade lithium hydroxide in phase II of Ya’an lithium industry (of which 30000 tons of battery grade lithium hydroxide production line will be completed and put into operation by the end of 2022), 11000 tons of lithium chloride and its products have been started. By 2025, the company’s comprehensive capacity of lithium salt products will reach more than 100000 tons. 2) The client has been successfully embedded into Tesla, Panasonic, LG and other global high-quality supply chains, reflecting the leading product quality of the company. With the continuous volume of overseas high nickel models, the company’s performance will be released rapidly.
Lithium resources are highly guaranteed, which helps the company grasp the opportunity of price rise. The company has made a global multi-source lithium resource layout. We expect that the existing lithium resource supply channels and inventory can meet the production needs in 2022: 1) Lijiagou: shares 37.25% of Lijiagou lithium mine (equivalent to 510000 tons of lithium oxide reserves), has the priority of supply, and is expected to be put into operation in the second half of 2022; 2) Core: participate in 4.18% equity of Australian core company and sign lithium concentrate underwriting agreement (75000 tons of lithium concentrate / year); 3) Participate in 5.01% equity of Eastern resources Australia and 9.5% equity of EV resources Australia, and cooperate in the development of lithium resources; 4) Renew the lithium concentrate underwriting agreement with Galaxy lithium to provide no less than 120000 tons of lithium concentrate every year until 2025.
The Coro project is progressing smoothly, and the agreed price adjustment of lithium concentrate can bring low-cost lithium ore. According to the announcement on February 17, it is expected that 22q4 of Coro project will provide lithium concentrate for the company as agreed in the agreement, and the supplementary agreement to the off purchase agreement will be signed on February 16, adjusting the reference price and maximum price of lithium concentrate in the original agreement. It is expected that the adjustment of the maximum price can provide the company with a batch of lithium concentrate with cost advantage in the future and increase the company’s performance, It also shows that the cooperation between the company and suppliers is deepening, and the cooperative relationship is stable and good.
Investment suggestion: considering the rapid rise of lithium price, we adjusted the company’s forecast of net profit attributable to the parent company from 2021 to 2023 to 925 million yuan, 3844 million yuan and 4610 million yuan. Based on the closing price on February 21, 2022, the corresponding PE was 33x, 8x and 7x respectively, maintaining the “recommended” rating.
Risk warning: the demand of civil explosive business is less than expected; Lithium prices fell sharply; The project is not progressing as expected.
