\u3000\u3000 Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
Event overview: on January 11, the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company is RMB 3.79-4.2 billion, a year-on-year increase of + 218-261%, deducting the net profit not attributable to the parent company of RMB 3.79-4.29 billion, a year-on-year increase of + 237-282%.
Analysis and judgment:
The volume and price of lithium battery materials have risen together, and the successful implementation of the integration strategy has helped the performance exceed expectations. The company’s performance in 2021 and Q4 exceeded our previous expectations. In a single quarter, the net profit attributable to the parent company of Q4 was 1.331-1.831 billion yuan, a significant increase of 178-283% year-on-year and 48-103% month on month. Reasons for performance changes: 1) the implementation of the company’s business strategy of high-end products and industrial integration has achieved outstanding results. On the one hand, the company continues to increase the layout of high nickel products and is deeply bound with downstream core customers. On the other hand, the upstream resource layout continues to be promoted and the Huayue project is put into trial production in advance; 2) The volume and price of lithium battery materials have risen simultaneously: the company’s ternary precursor capacity has successfully produced large quantities, and the product price has risen sharply, significantly thickening the company’s performance; 3) High metal prices thickened the company’s performance: Q4 copper and nickel prices remained high, and metal cobalt prices rose by 20% month on month, contributing considerable profits to the company; 4) BAMO technology was listed in Q3, which significantly improved the company’s performance in 2021.
The copper cobalt plate has become a large-scale plate, and the lithium plate complements the puzzle to build the advantage of core resources. In 2021, the annual smelting capacity of the company’s copper cobalt plate will be 111000 tons and 39000 tons respectively: (1) nickel: the company’s nickel cobalt project is progressing smoothly: 1) the 60000 ton annual nickel metal hydrometallurgy project in Huayue has been put into trial operation in advance in 2021q4, and is expected to increase rapidly; 2) Huake nickel’s 45000 T / a high nickel matte project was started in the first half of 2021 and is expected to be put into operation in the middle of 2022; 3) The preliminary work of Huafei nickel cobalt 120000 ton crude nickel cobalt hydroxide hydrometallurgy project was started; 4) Quzhou Huayou 30000 (metal) ton battery grade nickel sulfate project is expected to be completed and put into operation in 2022. (2) Cobalt: the company is deeply engaged in the Democratic Republic of the Congo. Its subsidiaries CDM and mikas have a total crude cobalt hydroxide production capacity of 21400 gold tons, and have a cobalt smelting capacity of 39000 gold tons. At the same time, the associated cobalt of Indonesia wet process project will also significantly contribute to the company’s primary cobalt production capacity. (3) Lithium: the company acquired 100% equity of prospect lithium mining company, acquired Arcadia lithium mine in Zimbabwe, supplemented the upstream resource puzzle, and formed a deep moat.
The downstream extends the layout of ternary cathode and lithium iron phosphate to create a more competitive new energy lithium battery industry ecology. 1) The company has a production capacity of 100000 tons of ternary precursors and 45000 tons of cathode materials (excluding BAMO Technology). At the same time, it has built a 50000 tons of high nickel ternary precursor project through non-public offering and issued convertible bonds of no more than 7.6 billion yuan to build an annual output of 100000 tons of ternary precursors / 50000 tons of high nickel cathode materials in BAMO, Guangxi The ternary precursor project with an annual output of 50000 tons will be built in Quzhou Huayou, and the ternary materials of the company will continue to be produced in large quantities in the future; 2) In terms of lithium iron phosphate, the company joined hands with Hubei Xingfa Chemicals Group Co.Ltd(600141) to jointly build a capacity of 500000 tons, acquired shengvanadium technology to obtain 10000 tons of built capacity and 75000 tons of lithium iron phosphate under construction, and the layout of downstream battery technology has been improved.
Investment suggestion: the company’s upstream resource layout is perfect, forming a deep moat, and the downstream lithium battery material expansion is progressing smoothly, which is expected to increase rapidly. We adjusted the company’s net profit attributable to the parent company from 2021 to 2023 to 4.016 billion yuan, 5.985 billion yuan and 7.563 billion yuan. Based on the closing price on January 11, 2022, the corresponding PE is 27x, 18x and 14x respectively, maintaining the company’s “recommended” rating.
Risk tips: the price of copper, cobalt and nickel has fallen sharply, the progress of its own project is lower than expected, the demand has declined, etc.
