Tengyuan cobalt industry (301219)
The layout of Congo (DRC) has the advantage of copper and cobalt raw material supply. The main raw materials of the company’s products are copper cobalt ore and cobalt intermediate products. The advantages of the company on the supply side are:
1) the company has set up a plant in the Democratic Republic of the Congo, which has the advantage of copper and cobalt resource channels. Congo (DRC) is rich in cobalt resources, with reserves accounting for about 50% of the world and cobalt supply accounting for more than 70% of the world. In 2016, the company set up Congo Tengyuan in DRC as the raw material procurement base, resource development base and product primary processing base of DRC. In addition, at present, Congo Tengyuan has obtained two exploration rights and one mining right. In addition, it also cooperates with giccsarl to develop exploration minerals, so as to further stabilize the company’s raw material supply and reduce ore procurement costs. In the future, the company will further extend to the exploration and mining of upstream mines, accelerate the development of resources and improve the layout of the whole industrial chain of the company;
2) high quality supplier resources. The company has established good cooperative relations with mining companies and large traders such as Glencore, China railway resources and Wanbao mining, and obtained a relatively stable and reliable source of copper and cobalt raw materials;
3) develop diversified cobalt resource recovery technology. The low-grade cobalt, low-grade cobalt ore, secondary intermediate and other resources associated with copper mine are recycled at low cost to produce high-quality cobalt intermediate.
With cobalt copper smelting as the core, the market share of products ranks among the top in China.
1) the expansion of cobalt and copper production capacity is accelerated, and the market share is expected to further increase: the company currently has a total cobalt salt production capacity of 6500 tons, an electrodeposited copper production capacity of 23000 tons, and a cobalt intermediate production capacity of 4000 tons in the Democratic Republic of the Congo. In 2020, the company’s cobalt salt output was 485897 metal tons, accounting for 5.92% of China’s total output, of which cobalt sulfate output accounted for 6.37% and cobalt chloride output accounted for 5.53%, ranking fifth in China. The company plans to raise 2.2 billion yuan, of which 1.7 billion yuan is used to further expand the copper and cobalt production capacity outside China, and finally realize 60000 tons of electrodeposited copper and 10000 tons of cobalt intermediates in the Democratic Republic of the Congo; China has a production capacity of 20000 tons of cobalt, 10000 tons of nickel and 3200 tons of copper. The scale of the company is further expanded, and the market share of cobalt salt is expected to further increase.
2) stable and reliable product quality and excellent customer structure: the two core products of the company are cobalt chloride and cobalt sulfate. With leading quality, the company has established long-term and close cooperative relations with leading precursor enterprises such as Beijing Easpring Material Technology Co.Ltd(300073) , Cngr Advanced Material Co.Ltd(300919) , Xiamen Tungsten Co.Ltd(600549) , Gem Co.Ltd(002340) , Ningbo Shanshan Co.Ltd(600884) , Jinchuan technology and so on.
Cobalt and copper mainly contribute to revenue and gross profit, and cobalt price fluctuation has a great impact on the company’s performance. In recent two years, the total revenue of copper and cobalt products accounted for more than 96% of the company’s revenue. In recent years, with the steady increase of the average price of copper and the superposition of Congo Tengyuan’s production and expansion, the revenue and gross profit level of copper sector have improved. The price of cobalt products fluctuated greatly, which had a great impact on the company’s performance. In 2019, the cobalt price was at the bottom of the cycle, the gross profit margin of the company’s cobalt products fell to 16.8%, and the proportion of gross profit fell to 44.7%.
Cobalt and copper prices may remain high, and the high growth rate of the company’s performance is expected to be maintained. In terms of cobalt, according to CRU, in 2021, the global cobalt supply was about 160000 tons, with a year-on-year increase of 13%, and the demand was 174000 tons, with a year-on-year increase of 27%. Cobalt products were in short supply. It is estimated that the increase in supply in 2022 will come from the by-products of nickel and cobalt intermediates in the Democratic Republic of the Congo and Indonesia, but the release rhythm of supply is disturbed or lower than expected by the epidemic, the demand is steadily improved driven by the recovery of traditional consumer electronics and new energy vehicles, the supply and demand side remains tight, and the cobalt price may continue to operate at a high level. In terms of copper, according to woodmackenzie, in 2021, the global copper output was about 24.58 million tons, with a year-on-year increase of 3.5%, and the demand was 24.45 million tons, with a year-on-year increase of 4.1%. The supply and demand were in tight balance. In 2022, the global economy will accelerate its recovery in the post epidemic stage. The steady growth policy will stimulate infrastructure, power grid and real estate consumption. The demand for new energy copper foil will contribute to the bright growth rate. The traditional and new energy sectors will work together to promote copper consumption, and the copper price is expected to remain high.
Investment suggestion: we expect the company to realize operating revenue of 6.53 billion yuan, 9.39 billion yuan and 12.09 billion yuan respectively from 2022 to 2024, and realize net profit of 1.77 billion yuan, 2.55 billion yuan and 3.27 billion yuan, with corresponding EPS of 14.05, 20.24 and 25.97 yuan / share respectively. “Buy-A” rating was given for the first time, and the six-month target price was 210 yuan / share.
Risk warning: the capacity of the company’s fund-raising projects is lower than expected; The downstream demand growth of copper and cobalt was lower than expected; The new production capacity of the industry is put into operation too fast, and the industry competition intensifies; The macro-economy fluctuated sharply, the risk of overseas operation increased, and the risk of enterprise raw material supply chain increased
