Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
After 20 years of deep cultivation, it has crossed the cycle and entered the growth and take-off stage. It is given a “buy” rating for the first time
The company is experiencing the transformation from the leader of China’s Cobalt industry to the leader of the global lithium battery material industry. With the accelerated construction progress of Indonesia’s nickel project and the continuous expansion of downstream lithium battery material production capacity, the integrated layout of lithium battery material industry chain is becoming more and more effective. The company is expected to weaken the disturbance of the price cycle to the performance by virtue of “increasing profits from upstream resources and improving performance from downstream materials”, so as to help the company cross the cycle and accelerate its growth. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 33.97/44.40/5.980 billion respectively, the corresponding EPS will be RMB 2.78/3.64/4.90 respectively, and the corresponding PE of the current stock price will be 45.3/34.7/25.7 times respectively. The “buy” rating will be given for the first time.
The integrated layout of the industrial chain has been basically opened up: nickel resources and ternary materials are the core of future performance growth
Upstream resources: at present, the annual production capacity of cobalt and copper smelting is 39000 tons and 111000 tons. As a traditional business, cobalt and copper will continue to provide stable raw material supply for the integrated transformation of the company. As the main position of the company’s “secondary entrepreneurship”, Indonesia nickel resources project, The planned production capacity is 225000 tons of metal (the equity production capacity is 90000 metal tons), the Huayue wet process project has been successfully put into trial production, and the implementation of Huake fire process project will follow closely. In the future, it will become one of the core focus of performance increment and the key to the company’s transformation to the integration of lithium battery industry chain. Downstream materials: at present, the annual production capacity of ternary precursor is 100000 tons, and we expect that the production capacity will reach 225000 / 325000 tons by 2022 / 2023 By combining with leading enterprises in the fields of ternary high nickel and lithium iron phosphate, the company has fully opened the last link in the layout of downstream lithium battery materials and realized the simultaneous development of ternary + iron phosphate. At present, the company has a total capacity of about 100000 tons of ternary cathode materials. We expect the annual capacity of cathode materials to reach 172 / 222000 tons from 2022 to 2023. The company is expected to accelerate the release of production capacity and promote the rapid growth of performance during the dividend period of the rapid development of new energy vehicles.
Integrated layout of industrial chain + manufacturing park construction of low-cost core advantages
Industrial chain integration: the company’s integration strategy has been deployed for six years, and the closed-loop ecological construction of the whole industrial chain has been basically completed. The company’s Indonesian nickel project has obvious competitive advantages in terms of production progress, capacity scale and ton investment. With the successful commissioning of Huayue wet process project, followed by Huake fire process project, we expect to contribute about 30000 metal tons of equity production by 2022. The company is expected to accelerate the release of low-cost advantage potential and help the profitability of cathode materials to a higher level. Park based production and manufacturing: the company realizes “resource sharing and partition supply” through park based production, so as to simplify the process flow, greatly reduce the production cost of precursors and optimize quality control management.
Risk tips: product price fluctuation risk, intensified market competition of cathode materials, new projects are not as expected, etc.
