\u3000\u3 China Vanke Co.Ltd(000002) 497 Sichuan Yahua Industrial Group Co.Ltd(002497) )
Events: (1) the company released its 2021 annual report. In 2021, the operating revenue was 5.241 billion yuan, a year-on-year increase of 61.26%, of which 2021q4 operating revenue was 1.795 billion yuan, a year-on-year increase of 73.05% and a month on month increase of 35.87%. In 2021, the net profit attributable to the parent company was 937 million yuan, with a year-on-year increase of 189.22%, of which the net profit attributable to the parent company in 2021q4 was 304 million yuan, with a year-on-year increase of 134.22% and a month on month increase of 0.67%. In 2021, the net profit not attributable to the parent company was deducted by RMB 919 million, with a year-on-year increase of 207.1%, of which the net profit not attributable to the parent company was deducted by RMB 307 million in 2021q4, with a year-on-year increase of 154.65% and a month on month increase of 3.92%. (2) The company released the quarterly report of 2022q1. The operating revenue of 2022q1 was 2.66 billion yuan, an increase of 210.22% year-on-year and 48.14% month on month. In 2021q1, the net profit attributable to the parent company was 1.022 billion yuan, with a year-on-year increase of 121002% and a month on month increase of 235.88%. In 2021, the net profit deducted from non parent company was 1.015 billion yuan, with a year-on-year increase of 130102% and a month on month increase of 230.49%.
Lithium industry and civil explosion industry contribute mainly to gross profit. In 2021, the revenue of lithium industry and civil explosive industry was 2.466 billion yuan and 2.654 billion yuan respectively, with a year-on-year increase of 265.9% and 6.6%, accounting for 47.1% and 50.6% of the total revenue. In 2021, the gross profit of lithium industry and civil explosive industry was 1.044 billion yuan and 780 million yuan respectively, with year-on-year changes of + 1089.4% and – 12.9%, accounting for 56.7% and 42.3% of the total gross profit.
Lithium business volume and price rose simultaneously, boosting the release of performance. (1) Volume: in 2021, the company had a capacity of 60000 tons / year of lithium carbonate and 33000 tons / year of lithium hydroxide. The annual output of lithium products was 27330 tons, a year-on-year increase of 149.69%; The sales volume of lithium products was 29136 tons, with a year-on-year increase of 66.82%. (2) Price: the average price of lithium salt products of the company is 84600 yuan / ton (the average price excluding tax of SMM electric carbon and hydrogen in 2021 is 10.7 yuan / 101000 yuan / ton respectively), with a year-on-year increase of 119.4%; The gross profit per ton was 35800 yuan / ton, an increase of 613% year-on-year. (3) Cost: the cost of a single ton of lithium salt is about 48800 yuan / ton, of which the material cost is 39300 yuan / ton. When converted to lithium concentrate (conversion ratio 8:1, exchange rate 6.5), the cost of a single ton of concentrate is about 756 dollars / ton (the average CIF price of SMM lithium concentrate in 2021 is 914 dollars / ton).
The capacity of the civil explosive industry is considerable, benefiting from the continuous improvement of the penetration rate of electronic detonators, and the performance of industrial detonating equipment projects is good. Specifically, in terms of the civil explosive industry, the company has a licensed production capacity of 228000 tons of explosives, a licensed production capacity of more than 204 million industrial detonators (according to the China explosive Association, the company’s production capacity of electronic detonators is about 54 million, and the production and sales of electronic detonators ranked first in China in 2021), a licensed production capacity of 115 million meters of industrial detonators and plastic detonators, and the capacity scale is in the forefront of the industry. The company also has various certificates to carry out blasting business and can undertake all kinds of blasting business, which is an important support for the rapid development of the company’s blasting business in recent years. According to the company’s performance disclosure, industrial detonator products are included in the industrial detonating equipment project. In 2021, the revenue, cost and gross profit of the project were 634 million yuan, 322 million yuan and 311 million yuan respectively, accounting for 23.9%, 17.2% and 39.9% of the corresponding projects in the civil explosive industry, and the proportion of gross profit increased by 19.8pct year-on-year.
The company is optimistic about the long business cycle of lithium industry and the growth of resource guarantee system. In the short term, according to the company’s announcement, there are mainly 120000 T / a package sales of MT cattlin, as well as shares in lithium mine Lijiagou and MT Finniss, which will be put into operation successively this year. In the medium and long term, the company has established a joint venture with Eastern resources to jointly develop trigger Hill Lithium Tantalum project, successively participated in EV resources company, aby company, Oceana company to be invested and ultra lithium company to be invested, and acquired the controlling shares of Fugen lake and Georgia lake lithium mining projects in cash. The company participated in the development of Greenland lithium project and may contribute considerable lithium raw materials in the future.
The smelting capacity is planned to exceed 100000 tons in 2025, and the lithium hydroxide capacity is expected to reach 63000 tons in 2022, which is at the leading level in the industry. According to the company’s announcement, the company has a capacity of 43000 tons of lithium salt (including 33000 tons of lithium hydroxide, 6000 tons of lithium carbonate and 4000 tons of other capacity). The company officially launched the construction of 30000 tons of battery grade lithium hydroxide production line in phase II of Ya’an lithium industry in 2021. According to the company’s announcement, the production line is expected to be completed and put into operation by the end of 2022; The third phase plan is under preparation. By 2025, the company’s comprehensive capacity of lithium salt products is expected to exceed 100000 tons.
The company is the main supplier of Tesla 4680 battery. It continues to verify the quality of the company’s lithium hydroxide products. With the mass production of the latter 4680 battery, the contract is fulfilled or accelerated. On December 29, 2020, the wholly-owned subsidiary Ya’an lithium industry signed a battery grade lithium hydroxide supply contract with Tesla, which agreed that Tesla would purchase battery grade lithium hydroxide products with a total value of US $630 million to US $880 million from Ya’an lithium industry from 2021 to 2025. In 2021, the contract has been performed for 24.91 million yuan and the amount to be performed is US $626876 million. 4680 is an important development direction of lithium battery in the future. The company is embedded in the core supply chain, or has the first mover advantage, and the lithium hydroxide capacity may continue to increase.
As a leading enterprise, the company may continue to benefit from the improvement of the penetration rate of electronic detonators. The market concentration of electronic detonators also shows an increasing trend. In 2021, the production and sales of Sichuan Yahua Industrial Group Co.Ltd(002497) electronic detonators ranked first in China, or continued to benefit from the improvement of the penetration rate of electronic detonators. In 2021, the production capacity of Sichuan Yahua Industrial Group Co.Ltd(002497) electronic detonators was about 54 million, in addition, the output was 30.33 million and the sales volume was 30.49 million, accounting for 19.4% and 20.5% of the national production and sales of electronic detonators respectively, ranking first in China.
Investment suggestion: we expect the company’s operating income to be RMB 15.221 billion, 19.589 billion and 23.525 billion respectively from 2022 to 2024, and its net profit to be RMB 3.791 billion, 4.293 billion and 4.804 billion respectively, with corresponding EPS of RMB 3.29, 3.72 and 4.15 yuan / share respectively. At present, the corresponding PE share price is 8.3, 7.3 and 6.6 times. Maintain the “overweight-a” rating, and the six-month target price is 42 yuan / share.
Risk warning: the demand is less than expected, the project progress is less than expected, and the lithium price fluctuates sharply
