\u3000\u3 China Vanke Co.Ltd(000002) 738 Sinomine Resource Group Co.Ltd(002738) )
Investment Event: the company invested in the construction of 35000 tons of high-purity lithium salt project with a total investment of about 1 billion yuan through its wholly-owned company Chunpeng lithium industry.
The construction of 35000 tons of high-purity lithium salt has greatly increased the company’s lithium salt production capacity. The company invests in the construction of high-purity lithium salt with an annual output of 35000 tons through Chunpeng lithium industry, a wholly-owned Sun company. The main products are battery grade lithium carbonate and battery grade lithium hydroxide, and the by-product is anhydrous sodium sulfate. The construction period of the project is about 12 months. The total investment of the project is planned to be 1 billion yuan. First, Chunpeng lithium will invest its own funds, and the insufficient part will be solved through self raised funds. The means include but are not limited to Chunpeng lithium applying for bank loans, various entities within the scope of company merger providing financial support to Chunpeng lithium After financing by issuing shares or corporate bonds, the company provides Chunpeng lithium in the form of equity capital increase or loan. The company’s lithium salt phase I “25000 tons of battery grade lithium hydroxide and battery grade lithium carbonate” project has been put into operation in August 2021 and reached production by the end of 2021, and has formed the sales and performance contribution of battery grade lithium hydroxide products in 2021q4. After obtaining the successful construction experience of lithium salt phase I project, making a major breakthrough in the layout of lithium mine and ensuring the resource side, the company expands the production capacity of 35000 tons of high-purity lithium salt, which is expected to take the new energy vehicle Dongfeng to improve the industry status and market competitiveness in the field of lithium battery raw materials and new materials, and enhance the future performance flexibility of the company.
Major breakthroughs have been made in lithium mines, the resources for lithium salt production expansion are guaranteed, the whole enterprise has been transformed into an integrated enterprise of lithium resource mining and beneficiation and lithium battery new material processing, and the company’s strategy has been steadily promoted. The company’s upstream lithium mine layout has made a major breakthrough, and the expansion of resource guarantee is a solid foundation for the company’s 35000 ton lithium salt production capacity expansion. The company’s own lithium mine, the 120000 ton spodumene mining and dressing capacity of Tanco mine in Canada, was officially put into operation in October 2021 (it has basically reached the production capacity at present), and the 180000 ton expanded capacity is expected to be put into operation in the middle of 2022. In addition, the bikita mine in Zimbabwe to be acquired by the company is a mature and producing lithium mine with convenient transportation, complete infrastructure and corresponding production facilities. Now it has a processing capacity of 700000 tons of lithium permeable feldspar, and plans to expand the mining and beneficiation capacity of 1.05 million tons. The reserve of untapped lithium ore resources in the company’s Tanco mine is equivalent to 277100 tons of Li2CO3 equivalent, and the reserve of lithium mineral resources in the proposed bikita mine in Zimbabwe is equivalent to 849600 tons of Li2CO3 equivalent. Once the company completes the acquisition of bikita mine, the company has a total lithium resource reserve of 1126700 tons of Li2CO3 equivalent, which will provide medium and long-term stable raw material supply for the expansion of the company’s lithium salt production capacity.
Investment suggestion: by the end of 2021, the new capacity of 25000 tons of lithium salt will be put into operation and reach the production capacity, realizing the breakthrough of the company’s lithium carbonate and lithium hydroxide business from “0” to “1”; At the beginning of 2022, the company plans to acquire bikita mine, making a major breakthrough in the upstream lithium mine; After laying a solid foundation for the protection of lithium resources, the company started the expansion of 35000 tons of new lithium salt production capacity. The company’s lithium industry strategy has been steadily promoted, showing the company’s perfect strategic conception and strong execution. With the production and release of the company’s new lithium salt and lithium ore capacity, the company’s lithium salt output and lithium ore self-sufficiency rate will increase significantly, accelerate the transformation to an integrated enterprise of lithium resource mining and beneficiation and “specialized special new” lithium battery new material processing, and the performance is expected to enter an explosive period. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2021 to 2023 will be RMB 547, 3483 and 3735 million, corresponding to EPS of RMB 169, 1072 and 11.49 from 2021 to 2023 and PE of 58x, 9x and 8x from 2021 to 2023, maintaining the “recommended” rating.
Risk tips: 1) the downstream demand for lithium salt has shrunk significantly; 2) Lithium salt prices fell sharply; 3) The release of new production capacity of the company is less than expected; 4) Insufficient supply of lithium concentrate resources of the company; 5) The company failed to complete the acquisition of lithium ore; 6) Cesium rubidium salt prices fell sharply.
