\u3000\u3 China Vanke Co.Ltd(000002) 497 Sichuan Yahua Industrial Group Co.Ltd(002497) )
Event: the company announced that Yahua international, a wholly-owned subsidiary of the company, plans to subscribe for 3.7 million shares of aby company in Australia at a price of a $0.75 per share, accounting for 3.4% of the total share capital of aby company before IPO.
The lithium reserves of aby company are considerable. Aby is a battery metal company registered in Australia and has mineral resources in African countries such as Sudan and Ethiopia. The core assets of the company are mainly kenticha lithium mine in Ethiopia (holding 51% equity). The mining of kenticha lithium mine began in 1990. The area has highly mineralized lithium cesium tantalum (LCT) pegmatite. It has proven 67.4 million tons of lithium resources and the average grade of Li2O is 1.03%. It is further exploring and developing the mineralized lithium resources. The total resources range from 80-11 million tons of lithium resources, equivalent to more than 1 million tons of Li2O; The resources in the southern and Northern reserves have great potential for future growth, and the overall resource scale can be comparable to the pegmatites of talison, wodgina and other projects in Australia. The overall technical and operation team of kenticha lithium mine comes from the former Galaxy lithium industry in Australia and has long-term good cooperation with Sichuan Yahua Industrial Group Co.Ltd(002497) the lithium concentrate of phase I 200000 t / a (equivalent to 30000 T / a of Li2CO3 equivalent) production line will be delivered in the second quarter of 2023, and the mine life is expected to exceed 18 years.
Strengthen upstream cooperation with lithium mining enterprises to ensure the company’s lithium supply. According to the agreement, aby company develops the kentica project in Oromia state in southern Ethiopia and sells and delivers lithium concentrate products to Yahua international. Aby company provides no less than 120000 tons of lithium concentrate every 12 monthly contract years. This equity subscription will help the company lock in the lithium concentrate underwriting right of kentica project and provide sufficient lithium resources for the development of the company’s lithium industry. At present, the company has a multi-point layout of lithium resources. On the one hand, it has signed underwriting agreements with Galaxy resources and Australian core to ensure the current supply of lithium concentrate; Lijiagou lithium mine is expected to be put into operation this year, and the company has the preemptive right; In addition, it cooperates with eastern Australia mining to develop the trigghill lithium project. The multi-channel layout of lithium resources can provide sufficient raw materials for the production of lithium battery materials.
With the dual wheel drive of civil explosion and lithium industry, the company’s performance growth can be expected. At present, the company has a production capacity of 43000 tons of lithium products. The fixed increase projects started in 2021 include 50000 tons of electronic lithium hydroxide, 11000 tons of lithium chloride and other products. The production capacity of lithium products of the company is expected to exceed 100000 tons in the future. Since 2021, benefiting from the high prosperity of the new energy track, the prices of lithium carbonate and lithium hydroxide have increased significantly, driving the substantial growth of the company’s performance. According to the performance forecast of the company in the first quarter, the net profit in the first quarter is expected to be RMB 900-1.2 billion, with a year-on-year increase of 105367143822% and a month-on-month increase of 208310.6%. The company’s civil explosive business remains stable as a whole. With the comprehensive promotion of China’s electronic detonators, it is expected to achieve better development in the future and build another pole for the company’s performance growth.
Profit forecast and investment suggestions: it is estimated that the company’s EPS in 2021 and 2022 will be 0.80 yuan and 3.19 yuan. Calculated by the closing price of 35.08 yuan on March 1, PE will be 43.75 times and 11.01 times respectively, giving the company an investment rating of “overweight”.
Risk tip: the product price has fallen sharply, and the progress of new projects is lower than expected
