Sichuan Yahua Industrial Group Co.Ltd(002497) event comment: subscribe for the equity of ultra lithium company, and the long-term lithium resources are expected to be self-sufficient

\u3000\u3 China Vanke Co.Ltd(000002) 497 Sichuan Yahua Industrial Group Co.Ltd(002497) )

Event overview: on April 17, the company announced that it planned to subscribe 21276600 shares of Canada super lithium company at the price of $0.235 per share through its wholly-owned subsidiary Yahua international, accounting for about 13.23% of the total share capital of Canada super lithium company; At the same time, Yahua international invested in cash to acquire 60% equity of the wholly-owned subsidiary of Canada super lithium company, and controlled its Fugen lake hard rock spodumene lithium project and Georgia lake hard rock spodumene lithium project. On the same day, the two sides signed the sales and joint venture agreement.

The Canadian super lithium company is rich in mineral resources and focuses on the exploration and development of lithium, gold and copper resources. Super lithium company is an exploration and development company, which has all three types of lithium projects and 16 gold projects in Argentina and Canada, and the management of the company has rich experience in the exploration and development of lithium resources and gold. (1) Argentina lithium brine project: the company owns a lithium brine project in Catamarca Province, Argentina, with an area of more than 7000 hectares, which is located in the north of salardeantofalla project owned by Albemarle. Lagunaverdei and lagunaverdeii Salt Lake projects include about 3000 hectares of salt marshes, with three mining certificates covering an area of 7569 hectares, and the lithium ion grade is up to 1270mg / L. (2) Two Canadian hard rock lithium projects: the first is the lake Georgia project, located in Ontario, Canada, with an area of 2416 hectares; The second is the adjacent Fugen Lake project, covering an area of 256 hectares. (3) 16 Argentine gold projects: located in the chepes area, a gold mining area with a long history in LaRioja Province, including 3 exploration warrants and 13 mining warrants, with a total area of more than 30000 hectares, and the gold grade in the sample is as high as 54.77 g / T.

The preliminary exploration resource scale of lithium mine is limited, but the exploration potential is large. The first phase plans to build a capacity of 200000 t / a lithium concentrate. (1) The infrastructure of the mining area is relatively perfect: the mining right area of Fugen lake and Georgia Lake projects is 26.72 square kilometers in total. The infrastructure is good, the transportation is convenient, the infrastructure such as hydropower is complete, and the nearby expressway can directly reach the port (about 145 kilometers). (2) The scale of preliminary exploration resources is limited: the estimated resource of Fugen Lake project is 6.4 million tons, the average grade of lithium oxide is 2.2%, and the estimated lithium oxide equivalent is about 140000 tons; The estimated resource volume of Georgia Lake project is 5.4 million tons, and the average grade of lithium oxide is 1.2%. It is estimated that the equivalent of lithium oxide is about 65000 tons. (3) Capacity Construction: the first phase will design and build a 200000 t / a lithium oxide 6% lithium concentrate mining and dressing plant, which will last for no less than 10 years. In the later phase, according to the further detailed exploration, the second phase will be built to expand the capacity to 400000 tons. (4) Huge exploration potential: according to the judgment of the core members of the senior expert group of China’s Methyl card and X03 vein exploration, the lithium project has the potential of probable exploration and discovery of large spodumene reserves, which can be expected in the future.

The global layout of lithium resources has been continuously improved, the production expansion of lithium salt smelting has been steadily promoted, and the supply capacity of lithium resources has been upgraded again. The long-term lithium salt production capacity of the company is planned to be more than 100000 tons, and the expansion of production is steadily promoted; At the same time, lithium resources are distributed all over the world. We estimate that the company has locked in 495000 tons of lithium ore per year (about 62000 tons of LCE) in the future. After this acquisition, it is expected to increase 2 Shenzhen Guohua Network Security Technology Co.Ltd(000004) 00000 tons of lithium ore per year, and the long-term lithium resources are expected to fully match the smelting capacity.

Investment suggestion: considering that the lithium price is expected to remain high for a long time and the protection of lithium resources of the company is further consolidated, we expect the net profit attributable to the parent company from 2021 to 2023 to be 925 million yuan, 3987 million yuan and 4702 million yuan. Based on the closing price on April 15, 2022, the corresponding PE is 39x, 9x and 8x respectively, maintaining the “recommended” rating.

Risk warning: the demand of civil explosive business is less than expected; Lithium prices fell sharply; The project is not progressing as expected.

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