Qinghai Salt Lake Industry Co.Ltd(000792) (000792)
1、 Event overview
According to SMM, on December 29, the price of battery grade lithium carbonate in China increased by 6000 yuan, with an average price of 270000 yuan, the price of industrial grade lithium carbonate increased by 6000 yuan, with an average price of 252000 yuan, and the price of lithium salt accelerated again.
2、 Analysis and judgment
Sitting on the largest potassium magnesium lithium salt deposit in China, it creates a deep moat and is the guarantee of China’s strategic potassium and lithium resources.
1) Chaerhan Salt Lake stores more than 60 billion tons of soluble salt resources. The reserves of potassium, magnesium and lithium rank first in the world. High quality resources create a deep moat. 2) In 2016, the Ministry of land and resources listed 24 minerals including potassium and lithium in the strategic mineral catalogue for the first time. Potassium fertilizer is related to the most fundamental food security of the country. The company plays a role of ballast and stabilizer in ensuring the safe supply of potassium fertilizer in China, and lithium, as “white oil”, is the guarantee for the transformation and upgrading of new energy in the future, Qinghai Salt Lake Industry Co.Ltd(000792) shoulder the important task of ensuring the supply of key national strategic minerals.
Reduce overseas dependence and take salt lake lithium extraction from a strategic perspective. China’s salt lake lithium extraction is expected to usher in a revaluation.
1) Driven by “demand + lithium resource security”, China’s salt lake resources ushered in a period of development opportunities. As the world’s largest lithium consumer, China has imported more than 90% of lithium raw materials from Australia in recent years. The security of lithium resources is prominent. China is rich in salt lake resources and will usher in a period of development opportunities. 2) Price side: the medium and long-term lithium price may be in the business cycle, and this round of lithium price is still in the upward range, or continue to the whole year of next year.
Lanke lithium, a subsidiary of Lanke lithium, takes the lead in lithium extraction technology in Salt Lake and ushers in the rise of both volume and price. The company may welcome large-scale production expansion in the future.
The subsidiary of Qinghai Salt Lake Industry Co.Ltd(000792) which is producing and extracting lithium is Lanke lithium. Lanke lithium’s patented adsorption lithium extraction process is one of the most leading and lowest cost lithium extraction technologies in salt lake at present. Lanke lithium’s phase I lithium carbonate project with an annual output of 10000 tons has achieved continuous over production and full sales. The phase II lithium carbonate capacity of 20000 tons / year has been put into trial operation, and the daily output of lithium carbonate has reached 100 tons. We estimate that the full cost in the first three quarters of 2021 has been as low as about 37700 yuan / ton. Lanke lithium’s adsorption process is mature and suitable for large-scale production expansion. The company discharges 200000-300000 tons of LiCl of old brine every year, which can support the large-scale expansion of lithium production capacity in the future.
3、 Investment advice
Core investment logic: (1) listed companies have successfully stripped off loss making chemical and magnesium assets; (2) potash fertilizer is stable and full production, benefiting from this round of price recovery; (3) Lanke lithium’s first and second production capacities are about to reach production capacity, and will usher in a simultaneous increase in volume and price. We predict that the company’s net profit attributable to the parent company from 2021 to 2023 will be RMB 5.375 billion, RMB 6.765 billion and RMB 7.184 billion respectively, and the earnings per share will be RMB 0.99, RMB 1.25 and RMB 1.32 respectively. It will be covered for the first time and the company will be rated as “recommended”.
4、 Risk tips:
The price of potash fertilizer fell sharply; The production progress of Lanke lithium industry was lower than expected, and the lithium price decreased significantly.
