\u3000\u3 China Vanke Co.Ltd(000002) 497 Sichuan Yahua Industrial Group Co.Ltd(002497) )
Event overview: on February 27, the company announced that it planned to subscribe for 3.7 million shares of Australian aby company with a total of a $2.775 million per share through Yahua international, accounting for 3.4% of its total share capital before IPO.
The kenticha lithium mine under aby is rich in resources and reserves, and the phase I production line is expected to be completed and put into operation in the second quarter of 23 years. Aby’s core assets are mainly kenticha lithium mine in Ethiopia (holding 51%). The mine has 67.4 million tons of proven lithium resources (Li2O average grade 1.03%), with a total resource of about 80-110 million tons, equivalent to more than 1 million tons of Li2O reserves. The overall technical and operation team comes from the former Galaxy lithium industry in Australia and has long-term good cooperation with the company. It is expected that the lithium concentrate of phase I 200000 t / a (equivalent to 30000 t Li2CO3) production line will be delivered in the second quarter of 2023, and the mine life is expected to exceed 18 years.
The contracted amount of lithium concentrate is considerable, and excess returns can be obtained after IPO. According to the agreement, the company will pay an advance payment of US $40 million six months before the first production of products in the mine (negotiate a detailed plan for deducting the payment before payment). 1) Quantity purchased: aby company promises to provide lithium concentrate of no less than 120000 tons per contract year; 2) Off purchase price: both parties will negotiate with reference to the price of lithium concentrate based on 6% Li2O published on relevant market websites no later than 3 months before the expected delivery date of lithium concentrate. 3) Cooperation period: the agreement is valid until the end of 2025 and can be automatically extended for 2 years under normal circumstances. By participating in aby, the company can further develop upstream resource barrier channels, and the completion of aby’s IPO will also bring excess returns to the company.
The global layout of lithium resources has been continuously improved to consolidate the supply foundation of lithium salt raw materials. The company distributes lithium resources worldwide. We expect that the company’s existing supply channels and inventory can meet the production needs in 2022. In the future, the locked lithium concentrate (including Lijiagou) has reached 495000 tons / year (about 62000 tons LCE), and the resource guarantee rate has been further improved. The rest of the company’s resource layout also includes: 1) Lijiagou: participating in 37.25% equity of Lijiagou lithium mine, It is expected that 2022h2 will be put into operation and has the priority of supply; 2) FeNiS lithium mine: participate in 4.18% equity of Australian core company and sign the 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 to cooperate in the development of lithium resources; 4) Renew the lithium concentrate underwriting agreement with Galaxy lithium to provide no less than 120000 T / a lithium concentrate supply by 2025.
The expansion of lithium salt smelting production has been steadily promoted, and the downstream high-quality customers have been deeply bound. 1) On the capacity side, in 2021, the company has 43000 tons of lithium salt capacity (including 33000 tons of lithium hydroxide capacity), 50000 tons of battery grade lithium hydroxide in phase II of Ya’an lithium industry (including 30000 tons of battery grade lithium hydroxide production line to be completed and put into operation by the end of 2022), and 11000 tons of lithium chloride and its products have been started, In 2025, the company’s lithium salt comprehensive production capacity is planned to 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.
Investment suggestion: considering the rapid rise of lithium price, we expect the net profit attributable to the parent company from 2021 to 2023 to be 925 million yuan, 3844 million yuan and 4610 million yuan. Based on the closing price on February 25, 2022, the corresponding PE is 40x, 10x and 8x 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.
