\u3000\u3 Guocheng Mining Co.Ltd(000688) 707 Guizhou Zhenhua E-Chem Inc(688707) )
Event:
Guizhou Zhenhua E-Chem Inc(688707) issue the annual report for 2021. The company achieved a revenue of 5.515 billion yuan in 2021, a year-on-year increase of + 432.07%; The net profit attributable to the parent company was 413 million yuan, and the net profit deducted from non attributable to the parent company was 403 million yuan, of which Q4 achieved a revenue of 1.971 billion yuan, a month on month increase of + 35.05%; The net profit attributable to the parent company was 152 million yuan, a month on month increase of + 38.91%. In 2021, the performance exceeded expectations and turned losses into profits, mainly due to the simultaneous increase of the company’s three positive maximum prices.
Key investment points:
The increase of output combined with the optimization of product structure has significantly improved the profitability of the company. In 2021, the company’s output of cathode materials was 34000 tons, with a year-on-year increase of 339%. The output of cathode materials increased significantly, driving the cost reduction and efficiency increase in production and manufacturing links. The cost rate during the period decreased from 18.7% in 2020 to 5.7% in 2021. In 2021, the company’s high nickel 8 series ternary materials increased significantly in sales and revenue due to matching the needs of downstream customers. In 2021, high nickel revenue accounted for 38.08% of the current revenue, an increase of 32.71 PCT year-on-year. The gross profit margin of high nickel 8 series products is relatively high. The mass supply of high nickel products improves the company’s profitability while increasing revenue. In 2021, the gross profit margin of the company’s main business was 14.56%, an increase of 8.7 PCT year-on-year.
The integrated layout of self supplied precursors helps to improve the net profit per ton. The company’s main products adopt the cost plus pricing mode of “main raw material cost + processing price”, and the sales price changes with the price of raw materials. The gross profit margin rose rapidly in 2021. In addition to the increase in the proportion of high nickel 8 series ternary materials, it also benefited from the fact that the company prepared goods in advance under the background of the upward market price of raw materials, and the increase of unit material cost of products was less than that of unit material price. In addition, the company has invested in Hongxing electronics to lay out the waste lithium-ion battery and material recycling industry, and strengthen the ability to control the cost of raw materials such as ternary precursors. In the future, with the expansion of the supply scale of Red Star electronic raw materials, it is expected to further reduce the cost.
H2 in 2022 is an important turning point in the industrialization of sodium ion battery, and the company is expected to seize the opportunity by virtue of its technical advantages. At present, the high price of lithium carbonate drives the rising cost of lithium battery, and sodium battery has entered the stage of accelerated development. The equipment and technology compatibility of ternary cathode production line is very strong. The accumulation of surface modification and single crystal technology of the company helps to grasp the development opportunities of sodium battery. The industrialization advantages of sodium ion battery cathode materials are significant. At present, the company’s sodium ion battery cathode materials have entered the pilot stage.
Profit forecast and investment rating: the increased penetration rate of new energy vehicles drives the rapid growth of cathode demand. As a single crystal leading enterprise, the company’s capacity expansion is expected to drive the improvement of performance. Red Star Electronics is arranged at the raw material end, and the scale of self supplied materials is expanded, which is expected to further reduce the cost. Therefore, we raised its profit. It is estimated that the operating revenue of the company from 2022 to 2024 will be 13.538 billion yuan, 19.943 billion yuan and 27.867 billion yuan, and the net profit attributable to the parent company will be 869 million yuan, 1.267 billion yuan and 1.656 billion yuan. The current share price corresponds to PE of 29.20x, 20.02x and 15.31x, which is rated as “buy”.
Risk tips: the capacity expansion is less than expected, the sales volume of new energy vehicles is less than expected, the price of raw materials continues to rise, the iteration of product technology is less than expected, and there is a great risk of dependence on Contemporary Amperex Technology Co.Limited(300750)
