The significant deviation between the share price and commodity price of lithium carbonate listed companies has lasted for nearly seven months. From August 31, 2021 to March 16, 2022, the price of battery grade lithium carbonate increased by 350%, and the share prices of leading enterprises Ganfeng Lithium Co.Ltd(002460) , Tianqi Lithium Corporation(002466) and Tianqi Lithium Corporation(002466) were corrected by 41.2% and 35.8% respectively, underperforming the Shanghai and Shenzhen 300 index by 27.6pct and 22.1pct. During this period, the commodity price of lithium carbonate rose and the share price of listed companies fell, which has become a great confusion for the stock investment of lithium carbonate industry. Therefore, we plan to find the law and answer through the historical performance of other commodities.
In the past two decades, there have been seven significant deviations between the share prices of listed companies and commodity prices, of which three have converged with the rise of the share prices of listed companies. We tracked three deviations between commodity prices and stock prices, and finally converged with the rise of stock prices, namely lithium carbonate in March 2021, iron ore in December 2018 and copper in November 2005. Similarly, we also tracked four deviations between commodity prices and stock prices, and finally converged with the decline of commodity prices, namely lithium carbonate in December 2017, coal in November 2011, aluminum in April 2008 and oil in August 2008.
One of the characteristics of these three times: the deviation time in the early stage ranges from 1 to 21 months. The longest of the above three deviations converging with the rise of stock price is 21 months, which occurred in copper from February 5, 2004 to November 13, 2005. The second is the iron ore from October 1, 2017 to December 31, 2018, with a deviation time of nearly 15 months. The third lithium carbonate occurred from February 18, 2021 to March 24, 2021, with a deviation time of only one month. The current round of lithium shares has been nearly seven months since the correction in September 2021. Theoretically, it is not ruled out that the share price will rebound in the future.
The second characteristic of these three times: after the deviation, the commodity price and the share price of listed companies still resonate and rise for nearly half a year. For example, the departure of copper ended on November 13, 2005, and the subsequent copper price and Jiangxi Copper Company Limited(600362) share price resonated upward, which continued until May 15, 2006. The copper price rose by 58%, while Jiangxi Copper Company Limited(600362) share price rebounded by 282%; The deviation of iron ore ended on December 31, 2018, and the iron ore price index continued to rise until July 21, 2019, reaching 420.53, an increase of 66%. Meanwhile, the share prices of Hainan Mining Co.Ltd(601969) and Shandong Jinling Mining Co.Ltd(000655) rebounded by 41% and 96% respectively.
Lithium is still supported by strong demand for electric vehicles, and lithium prices are expected to fluctuate at a high level in the next two years. In the middle of February 2022, the output of Shanxi Guoxin Energy Corporation Limited(600617) vehicles was 370000, and the penetration rate reached 20.3%, a new record high; In the Q4 announcement of 2021, Yabao company raised the lithium demand in 2025 and 2030 to 1.5 million tons and 3.2 million tons of LCE respectively. According to our annual strategy report, we expect the global lithium demand to reach 1606000 tons of LCE in 2025 and CAGR 34% from 2021 to 2025. The strong demand is expected to support the high fluctuation of lithium price in the next two years.
Lithium carbonate industry: the share price performance of lithium carbonate listed companies is still worth looking forward to. The current high lithium price has brought some cost pressure to some middle and lower reaches enterprises. The fear of the market's reverse phagocytosis of terminal demand is the core reason for the correction of lithium stock price in this round. We believe that the mismatch between supply and demand of lithium minerals will continue before the end of 2023, and the lithium price is expected to remain at a high level. When the game and profit distribution in all links of the industrial chain are balanced, the lithium stocks with low valuation are still expected to perform better.
Investment suggestion: according to our valuation model of lithium mineral stocks and the price of lithium carbonate of 400000 yuan / ton and the price of lithium concentrate of 3000 US dollars / ton, as of the closing price on March 18, 2022, the PE value of some listed companies of lithium mineral stocks in 2022 is less than 10 times, so the valuation is low. We believe that the self-sufficsufficiency rate of lithium resources is high, and we think that companies with low PE valuation are more likely to rebound in the share price of companies with high self-sufficsufficiency rate of lithium resources. We think that companies with high self-sufficsufficiency rate and low PE valuation are more likely to rebound. We suggest to focus on: Hongda Xingye Co.Ltd(002002) Tianqi Lithium Corporation(002466) \ \wait.
Risk warning: the output of new energy vehicles outside China is lower than expected, and the expansion of global mine production capacity is higher than expected; Relevant policy regulation and geopolitical risks; The process of substitutes significantly exceeded expectations; Lithium price is lower than expected; The risk of correlation failure based on historical data; The relevant calculation results may deviate from the actual value.
