\u3000\u3 Shengda Resources Co.Ltd(000603) 799 Zhejiang Huayou Cobalt Co.Ltd(603799) )
Event overview: on March 21, the company announced that it had reached strategic cooperation intentions with Volkswagen and Castle Peak holdings on the upstream and downstream cooperation of power battery cathode material industry chain, and planned to jointly layout the development of nickel and cobalt resources in Indonesia, as well as the integrated business of power battery cathode materials such as nickel and cobalt sulfate refining, precursor processing and cathode material production.
Analysis and judgment: control resources and expand materials, and build new energy with international competitiveness with international giants
Source lithium battery material integrated manufacturing platform. This strategic cooperation focuses on the upstream nickel and cobalt resources and the downstream lithium battery cathode materials. It aims to further strengthen the supply guarantee of power battery raw materials, strengthen the technological innovation coordination of the whole industry chain including precursors and cathode materials, and enhance the company’s core competitiveness in the global power battery material supply chain: 1) the three parties jointly establish an upstream joint venture: layout the nickel and cobalt resource development business in Indonesia, Jointly set up a joint venture with the planned construction scale of products with an annual output of about 120000 tons of nickel metal and about 15000 tons of cobalt metal, which can meet the supply of nickel and cobalt raw materials for about 160gwh batteries; 2) The company will establish a downstream joint venture with Volkswagen: the two sides will establish a joint venture for the new energy lithium battery cathode material integration project in Guangxi, China, engage in nickel cobalt sulfate refining, ternary precursor and ternary cathode material production and manufacturing, and will strengthen the technological innovation and coordination of the whole industrial chain of precursors and cathode materials, so as to give full play to their respective advantages in resources, technology Based on the advantages of industrial chain and terminal market, we will jointly build an internationally competitive integrated manufacturing platform for new energy lithium battery materials. We believe that this cooperation will further ensure the future growth of the company.
It is the only one that comprehensively distributes upstream resources such as lithium, cobalt, nickel and copper and extends and expands the dual technical route of “ternary + iron lithium”
The leader of integrated lithium battery materials is expected to grow rapidly with the advantages of high execution, low cost and comprehensive technical route. 1) Under the high executive power, the future projects will be gradually implemented and the capacity growth will be determined, and the company’s performance growth will be more steep: the company’s Huayue 60000 ton annual nickel metal hydrometallurgy project has been put into trial operation in advance in 2021q4, Huake nickel is expected to be put into operation in mid-2022, the preliminary work of Huafei (the equity ratio has been increased to 51%) project has been started, and the company’s future capacity growth is relatively determined; 2) The resource layout is perfect, and the cost advantage is gradually highlighted under the integrated layout: the copper cobalt sector of the company has become large-scale. With the successive production of Indonesia nickel project and Zimbabwe Arcadia lithium project in the future, as well as the gradual settlement of integrated production capacity such as Quzhou Huayou and Guangxi convertible bond projects, the company will build a deep moat in terms of cost; 3) With deep binding with downstream, the future production and sales will be guaranteed: the company has established joint ventures with LG, POSCO and other overseas leaders, and has successively reached strategic agreements with rongbai, dangsheng, Funeng and other downstream customers to lock in the sales of 6415926500 tons of ternary precursors from 2022 to 2025, with high certainty of future growth. 4) The layout of the technical route is perfect and the company is not afraid of future technological changes: the company has joined hands with Hubei Xingfa Chemicals Group Co.Ltd(600141) to build a production capacity of 500000 tons, acquired shengvanadium technology to obtain a production capacity of 10000 tons and a production capacity of 75000 tons of lithium iron phosphate under construction. The layout of the downstream battery technical route has been improved to further consolidate the future growth.
Investment suggestion: the company’s upstream resource layout is perfect, and the downstream lithium battery material production expansion is promoted smoothly. It is expected to be in large quantities quickly, and is deeply bound with international resources and automobile giants. It has high growth certainty and deep moat. We maintain the company’s net profit attributable to the parent company from 2021 to 2023 at 4.016 billion yuan, 5.985 billion yuan and 7.563 billion yuan. Based on the closing price on March 21, 2022, PE is 29x, 20x and 16x respectively, maintaining the company’s “recommended” rating.
Risk tip: the price of copper, cobalt and nickel has fallen sharply, the progress of its own project is lower than expected, the demand has declined, etc.
