\u3000\u3 China Vanke Co.Ltd(000002) 738 Sinomine Resource Group Co.Ltd(002738) )
Core view:
Investment Event: the company released the performance forecast of the first quarter report of 2022. The company expects to realize the net profit attributable to the shareholders of the listed company of RMB 760800 million in 2022q1, with a year-on-year increase of 830.39% – 879.36%; It is estimated that the net profit attributable to the shareholders of the listed company after deducting non profits will be 760800 million yuan, with a year-on-year increase of 934.25% – 988.69%; It is expected to achieve earnings per share of 2.336-2.459 yuan, a year-on-year increase of 793.31% – 840.34%.
The accelerated rise in lithium salt prices combined with the release of new capacity of the company’s lithium battery new materials has driven the company’s Q1 performance to increase significantly. The shortage of lithium resources in the upstream and the strong demand for new energy vehicles in the downstream accelerated the rise of lithium salt prices in 2022q1. The prices of battery grade lithium carbonate and lithium hydroxide in China rose from 2824 and 234300 yuan / ton in early January to 5175 and 497300 yuan / ton at the end of March respectively. In 2022q1, the average price of battery grade lithium carbonate in China reached 424200 yuan / ton, up 470.16% year-on-year and 102.77% month on month; The average price of battery grade lithium hydroxide reached 371700 yuan / ton, up 470.97% year-on-year and 84.47% month on month. At the time of lithium salt price boom, the company added new lithium battery materials track, the new 25000 ton battery grade lithium hydroxide and battery grade lithium carbonate production line reached production capacity in November 2021, and the reconstruction and expansion of 6000 ton lithium fluoride production line of the company was completed at the beginning of the year. The release of new lithium battery and new material capacity combined with the accelerated rise of lithium salt and lithium fluoride prices drove the substantial release of the company’s 2022q1 performance.
The acquisition of the upstream end of bikita lithium mine has made a major breakthrough, the resource self-sufficiency rate has been greatly improved, the expansion of lithium salt production is guaranteed, the whole enterprise integrating lithium resource mining and beneficiation and lithium battery new material processing has been comprehensively transformed, and the company’s strategy has been steadily promoted. The company has made a major breakthrough in the layout of upstream lithium mines. During the reporting period, the company plans to acquire bikita lithium mine in Zimbabwe, with retained lithium mineral resources reserves equivalent to 849600 tons of Li2CO3 equivalent. After the completion of the delivery, the company will fully release the existing 700000 tons of lithium permeable feldspar capacity of bikita mine, and plans to expand the spodumene beneficiation capacity. In addition, the company’s own lithium mine, the 120000 ton spodumene mining and dressing capacity of Tanco mine in Canada, was officially put into operation in October 2021 (it has basically reached the production capacity at present), and the 180000 ton expanded capacity is expected to be put into operation in the middle of 2022. After the upstream lithium resources are effectively guaranteed, the company will expand the lithium salt production capacity of 35000 tons, which is planned to be put into operation by the end of 2023. It is expected that by the end of 2023, the company is expected to form a supply scale of 60000 tons of LCE lithium salt capacity and 50000 tons of LCE’s own lithium ore capacity.
Investment suggestion: in the next 2-3 years, when the supply and demand rate of lithium resources remains in short supply, the company has realized the increment of lithium resources and the significant improvement of lithium mine self-sufficiency rate through the acquisition of bikita mine and the resumption of production and expansion of Tanco, which has laid a solid foundation for the company’s future growth and will accelerate the company’s transformation to an integrated enterprise of lithium resource mining and beneficiation and “specialized and special new” lithium battery new material processing, and its performance is expected to enter an explosive period. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2022 to 2023 will be 3.578 billion yuan and 5.015 billion yuan, corresponding to 7x and 5x PE from 2022 to 2023, maintaining the “recommended” rating.
Risk tips: 1) the downstream demand for lithium salt has shrunk significantly; 2) Lithium salt prices fell sharply; 3) The release of new production capacity of the company is less than expected; 4) Insufficient supply of lithium concentrate resources of the company; 5) The company failed to complete the acquisition of lithium ore; 6) Cesium rubidium salt prices fell sharply.
