Sinomine Resource Group Co.Ltd(002738) (002738)
Core view:
The global leader of cesium and rubidium in geological exploration has set sail for the lithium salt business, accelerating the transformation to specialized special new rare metal mining and processing and new lithium battery materials. Sinomine Resource Group Co.Ltd(002738) is a leading enterprise in overseas geological exploration, a global leader in cesium and rubidium, a leader in lithium fluoride in China, and a new upstart in the power battery lithium industry. The company started by relying on the geological exploration business. Through the acquisition of Jiangxi Dongpeng new materials and Canada Cabot special fluid business department, the company cut into the high-quality track of rare light metal resource processing and lithium battery new materials, and realized the troika business structure of geological exploration + cesium rubidium salt + lithium salt.
Cesium rubidium business: the global industry leader, the performance is expected to continue to grow, and clarify the strategic positioning of cash cow and supporting profit. Cesium and rubidium have wide application prospects, strong scarcity and important strategic value. In recent years, the production and sales of cesium salt products of the company have increased rapidly, with a compound growth rate of 24.3%. At present, the company has more than 50% of the global cesium market share and more than 80% of the world’s proven cesium garnet reserves. It is the only global supplier of acid cesium and has global pricing power. It is expected to continue to promote product upgrading and improve profitability in the future.
Lithium salt: the leading position of lithium fluoride in technological transformation has been continuously strengthened, and the new capacity of 25000 tons of lithium carbonate / lithium hydroxide has reached the maximum capacity, and the new energy is the strongest. The company is a leader in China’s lithium fluoride industry. The downstream has stable high-quality customers, and continues to consolidate its leading position in the industry with the further expansion of production capacity. The continuous shortage of lithium hexafluorophosphate supply and price rise of power lithium battery are also expected to be transmitted to the upstream to support the price of raw material lithium fluoride and improve the profitability of the company’s lithium fluoride business. The company’s new capacity of 25000 tons of lithium salt has been put into operation and reached the production capacity, realizing the breakthrough of the company’s lithium carbonate and lithium hydroxide business from “0” to “1”, which is expected to take the east wind of new energy vehicles and lithium batteries. With the gradual release of the company’s new capacity of lithium salt and the catalysis of strong lithium price, it will bring huge increment to the company’s future performance and bring the company’s growth and profitability to a new level, Create another Sinomine Resource Group Co.Ltd(002738) . In addition, the company extended to the upstream lithium mines, actively sought minerals to ensure the supply of lithium resources, resumed and expanded the production of the company’s own mine Tanco mine in Canada, signed the underwriting right of 280000 tons of spodumene concentrate and 784000 tons of lithium permeable feldspar concentrate of Arcadia lithium mine project in Zimbabwe, and subscribed for pwm5, a listed company in Canada 72% equity and signed the underwriting agreement for all lithium, cesium and tantalum products of case Lake project, which will gradually improve the company’s lithium self-sufficiency rate and finally achieve the goal of complete resource self-sufficiency.
The downstream expands rapidly, the resource shortage remains, and the lithium price will remain high and wait for the opportunity to break out. There is a lack of effective new production capacity in the world in 2021, while the new supply of lithium mines in Australia in 2022 is mainly re production mines, and the new production capacity of salt lakes in South America is mainly put in the second half of 22 years. Considering the capacity ramp up, equipment commissioning, product verification, epidemic situation and political interference of newly put into operation projects, it is expected that the real effective supply of lithium resources will not be large-scale until 2023, the resource shortage of lithium industry will continue in 2022, and the supply shortage of lithium industry is expected to expand to 47000 tons of LCE in 2022, By the end of 2021, the inventory of lithium concentrate in Australia and the inventory of lithium carbonate in China’s lithium salt plant had also been at a low level. In the case of limited new capacity and tight supply in the upstream, but the announcement of accelerated production expansion in the midstream of the lithium industry chain, the current situation that the expansion in the midstream of the industry chain is more radical and easy to realize than that in the upstream and the expectation of promoting the long-term shortage of lithium resources, increase the willingness of the industry chain to store lithium as the upstream raw material, and enlarge the demand of the lithium industry, It is expected that in 2022, the shortage of lithium resources and the continuous boom of new energy demand will maintain the lithium price at a high level. With the intermittent disturbance of supply and the seasonal expansion of consumption, the lithium price may rise further explosively at a high level
Investment suggestion: the geological exploration and cesium rubidium businesses have developed steadily, and the release of new lithium salt production capacity has contributed a huge increment. The company has accelerated the transformation to rare metal mining and processing and new lithium battery materials, and its performance is expected to increase significantly in the future. The company’s current valuation under the expected future performance is lower than the average level of lithium salt processing enterprises. With the breakthrough of the company’s layout and development in the field of lithium resources and the expansion of lithium ore production in Tanco mine, the integration of the company’s lithium industry chain extends upstream. In the future, the self-sufficiency rate of lithium resources may be increased from 16% to 80%, transforming from a simple lithium processing enterprise to a lithium resource mining and processing enterprise. The overall valuation of the company is also expected to be improved and close to a lithium resource enterprise with higher valuation level. It is estimated that the operating revenue of the company from 2021 to 2023 will be RMB 2.488 billion, RMB 8.458 billion and RMB 8.938 billion respectively, and the net profit attributable to the parent company will be RMB 556 million, RMB 1.669 billion and RMB 1.970 billion respectively, corresponding to pe3.8 billion 69, 12.91 and 10.93 times, with “recommended” rating.
