\u3000\u3000 Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
Key investment points
The company expects that the net profit attributable to the parent company in 2021q4 will be RMB 1.33-1.83 billion, with a month on month increase of 48-103%, exceeding market expectations. The company expects that the annual net profit attributable to the parent company in 2021 will be 3.7-4.2 billion yuan, with a year-on-year increase of 217.64% – 260.56%, of which the net profit attributable to the parent company in 2021q4 will be 1.331-1.831 billion yuan, with a year-on-year increase of 178-283% and a month-on-month increase of 48% – 103%, exceeding the market expectation. In 2021, the net profit not attributable to the parent company was RMB 3.79-4.29 billion, with a year-on-year increase of 237.20% – 281.68%, of which the net profit not attributable to the parent company was RMB 1.472-1.972 billion in 2021q4, with a month-on-month increase of 63% – 119%.
The joint venture capacity of ternary precursor was gradually released, and the company’s lithium battery material business layout was further improved. We expect that the company’s Q4 sales precursor will be about 15000-20000 tons, with a month on month increase of 10-20%. 55000 tons of independent production capacity will be fully produced and sold, and 45000 tons of joint venture production capacity will be gradually released. We expect to ship 65000-70000 tons throughout the year, double year-on-year. In addition, the company has arranged lithium and iron lithium businesses. Previously, the company announced that it would acquire Zimbabwe prospect lithium company for us $422 million and owns 100% equity of Arcadia lithium mine in Zimbabwe; The company signed a cooperation framework agreement with Hubei Xingfa Chemicals Group Co.Ltd(600141) to jointly invest in the construction of integrated industries of phosphate rock mining and beneficiation, phosphorus chemical industry, wet process phosphoric acid, iron phosphate and lithium iron phosphate materials, and further improve the business layout of lithium battery materials.
The company’s nickel hydrometallurgy project will be implemented in 2022, contributing new performance increment. In 2018, the company started the nickel cobalt hydroxide hydrometallurgy project with an annual output of 60000 tons of nickel metal in Indonesia in cooperation with Qingshan group (the project has been put into operation at the end of 2021. We expect to reach the production capacity in mid-22. Under the conservative price assumption, we can realize the net profit of more than 800 million yuan to the parent after reaching the production capacity; the company has invested US $516 million to build the high nickel matte project with an annual output of 45000 tons in Indonesia, and the company holds 70% of the shares. The company expects to be completed in mid-2022. Under the conservative price assumption, we expect to realize the net profit of more than 400 million yuan to the parent after reaching the production capacity. The company currently has Build a nickel smelting capacity of 225000 tons (regardless of equity), corresponding to the demand of more than 400000 tons of precursors. The company is determined to build an integrated layout from cobalt and nickel resources to ternary precursors, laying the foundation for the company’s transformation and upgrading to the leader of new energy lithium battery materials. The company has 10000 tons of battery grade nickel sulfate capacity, 30000 tons of capacity is under construction, and the new capacity is expected to be shipped in 2022. The improvement of integration ratio is expected to improve the profitability of the company’s precursors.
The company’s Cobalt and copper prices fluctuated upward, which is expected to contribute to the main profit increment. We expect the output of the company’s Cobalt product Q4 to be flat and increase slightly month on month. As the cobalt price fluctuates upward in Q4, we expect the single ton profit of cobalt product to be further improved compared with Q3. The rebound of cobalt price will lead to the rebound of profitability and great price elasticity. In Q4, we expect to produce about 30000 tons of copper products, with a flat and slight increase month on month. In 2021, Q4 copper futures price fluctuates in the region of USD 9500-10500 / ton, which is further upward than Q3 price center. We expect to further improve profitability. In 2021, we expect the output of copper products to be more than 100000 tons, with a slight increase year-on-year.
Profit forecast and investment suggestion: the prosperity of the industry continues. We revised the net profit attributable to the parent company from 3.18/4.56/6.23 billion yuan to 4.04/57.12/7.536 billion yuan from 2021 to 2023, with a year-on-year increase of 244% / 43% / 32%, the corresponding PE is 29x / 20x / 15x, 30xpe in 2022, the corresponding target price is 140 yuan, and maintain the “buy” rating.
Risk tip: the sales volume of electric vehicles is lower than expected, the policy is lower than expected, and the competition is intensified
