\u3000\u30003 China Zhenhua (Group) Science & Technology Co.Ltd(000733) 00073)
Event overview
Recently, the company announced that in the first quarter of 2022, the net profit attributable to the parent company was 350-40 million yuan, a year-on-year increase of 134.58% – 168.09%, and the net profit after deducting non recurring profits and losses was 320370 million yuan, a year-on-year increase of 178.40% – 221.91%.
Analysis and judgment:
The performance of 2022q1 increased significantly year-on-year and achieved a good start
According to the company’s announcement, in the first quarter of 2022, the company realized a net profit attributable to the parent company of 350-40 million yuan, a year-on-year increase of 134.58% – 168.09%; The net profit after deducting non recurring profits and losses was 320370 million yuan, with a year-on-year increase of 178.40% – 221.91% and a month-on-month increase of 3.34% – 19.49%. The main reasons for the substantial year-on-year growth of the company’s performance in the first quarter of 2022 are as follows: 1) the orders of international and Chinese major customers continued to grow rapidly in the first quarter; 2) The production line runs at full capacity; 3) The company’s third-generation high nickel and ultra-high nickel and other new products are steadily in large quantities, and its profitability is further enhanced. We believe that in the case of substantial fluctuations in raw material prices, the company’s performance has maintained rapid growth, the advantages of product performance and market competitiveness have emerged, and structural optimization has helped maintain a good level of profitability.
Binding high-quality lithium battery customers, capacity positioning, high-end & Globalization
Focus on the field of lithium battery cathode, with customers covering the world. The company has been deeply engaged in lithium cathode materials for many years, and its main products include multi-element materials, lithium cobalt oxide and other cathode materials, as well as multi-element precursors and other materials. Customers include SK on, LG Chemical, AESC and other global high-end lithium battery manufacturers. The application fields include power, consumption, energy storage and other fields. Capacity continued to expand, overseas layout deepened and international positioning. According to the disclosure of the annual report, the effective capacity of lithium battery materials of the company in 2021 was 44000 tons / year. At present, the company has started the capacity construction of 50000 T / a high nickel multi-element materials in Changzhou phase II and 20000 t / a small lithium battery cathode materials in Jiangsu phase IV. among them, the overall project of Changzhou phase II is expected to be gradually put into operation in the second half of 2022 to continuously enrich the product supply strength. In addition, the company has actively arranged overseas production capacity and launched the first phase of the new lithium battery material industry base project with an annual output of 100000 tons in Europe. It has become the first positive material enterprise in China to enter Europe to build production capacity. At present, the feasibility study and demonstration of the project have been completed, and strategic agreements have been signed with FMG, SK and other industrial partners. At the same time, the company and SK have agreed to establish a joint venture lithium cathode material factory in South Korea or the United States. At present, it has entered the preliminary project approval stage. With the continuous construction of production capacity, the company’s share in the global market is expected to further improve.
High nickel products continue to iterate, and the product layout is diversified
The trend of high nickel remains unchanged, and the company focuses on high-end products. The company is an early enterprise in the industry with high nickel, and its products continue to iterate. Ni83, ni88 and ni90 high nickel multi-component materials are mainly exported to overseas customers and applied in batch to first-line brand electric vehicles in Japan, South Korea, Europe and the United States. High voltage solid and high capacity ni95 products have been verified by international customers, and the product performance has reached the international leading level. We believe that with the expansion of the company’s production capacity and the optimization of product structure, and relying on the advantages of the company’s customer structure, the company’s profitability is expected to maintain a high level in the industry.
Product layout tends to be diversified. In addition to ternary cathode materials, the company began to layout lithium iron phosphate products and will invest in the construction of 300000 tons of lithium iron phosphate integrated chemical plant in Guizhou. The phase I project has entered the project approval stage. With the completion and operation of the project, the company’s layout in the field of cathode materials is more perfect and diversified, further increasing the performance growth pole.
Investment advice
The company is a high-quality supplier of cathode materials in China. With the expansion of production capacity, the superposition of products and the continuous optimization of customer structure, it is expected to bring continuous growth of performance. We adjusted the estimated operating revenue from 2022 to 2023 to 20.529 billion yuan, 24.525 billion yuan and 29.795 billion yuan respectively; The net profit attributable to the parent company from 2022 to 2023 is expected to be 895 million yuan and 1.200 billion yuan respectively, and adjusted to 1.542 billion yuan, 1.973 billion yuan and 2.549 billion yuan respectively from 2022 to 2024; The EPS of 20222023 predicted in the early stage is 1.97 yuan and 2.65 yuan respectively, adjusted to 3.04 yuan, 3.90 yuan and 5.03 yuan respectively in 20222024, and the corresponding PE is 24x, 19x and 14x respectively (calculated based on the closing price of 72.83 yuan on April 8, 2022). Maintain the “overweight” rating.
Risk tips
(1) the development of new energy vehicle industry fails to meet expectations due to epidemic and other factors; (2) The company’s capacity investment and capacity utilization did not meet expectations; (3) Upstream raw material price fluctuation and supply risk; (4) The company’s product demand and profitability do not meet expectations; (5) The customer’s payment collection did not meet expectations, etc.
