\u3000\u3000 Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
The performance forecast in 2021 was much higher than expected and maintained the “buy” rating
The company released the performance forecast for 2021, and it is expected to realize the net profit attributable to the parent company of RMB 3.7 billion to RMB 4.2 billion, a year-on-year increase of + 217.6% – 260.6%; The net profit deducted from non parent company was RMB 3.79 billion to RMB 4.29 billion, a year-on-year increase of + 237.2% – 281.7%; In 2021q4, the net profit attributable to the parent company in a single quarter was 1.32 billion yuan to 1.83 billion yuan, a year-on-year increase of + 178.4% – 283.0% and a month on month increase of + 47.9% – 103.4%. Thanks to the breakthrough of integration and high downstream demand, the volume and price of main products increased, driving the company’s annual performance to greatly exceed expectations. We raised the company’s profit forecast. It is estimated that the company’s net profit attributable to the parent company from 2021 to 2023 will be RMB 3.716 (+ 3.19) / 54.62 (+ 10.22) / 7.093 (+ 1.113) million respectively, and EPS will be RMB 304 (+ 0.26) / 4.47 (+ 0.83) / 5.81 (+ 0.91) respectively. The current stock price corresponds to PE of 31.0/21.1/16.2 times from 2021 to 2023, maintaining the “buy” rating.
In the fourth quarter, metal prices continued to rise, and both product volume and price boosted the performance much higher than expected
The company’s performance forecast exceeded expectations, mainly due to the continuous rise in the prices of energy metals and lithium battery materials. According to the data of wind and SMM, the single season copper, cobalt and nickel in 2021q4 were 7.11/44.06/148400 yuan / ton respectively, with a month on month ratio of + 2.0% / 18.2% / 2.9%; The single quarter average prices of smm6 precursor and cathode material 2021q4 were 13.8/239000 yuan / ton respectively, with a month on month ratio of + 3.9% / 24.4% respectively. When the prices of new energy metal materials rise in an all-round way, the sales volume of the company’s Cobalt and copper business is expected to reach 2.5/85000 tons respectively in 2021, the sales volume of precursors is about 65000 tons, and the production capacity of BAMO will continue to be released. The rising volume and price of main products boost the performance in 2021.
In 2022, the integration effect will be released in the first year, and the performance flexibility can be expected
We expect the cobalt copper business to maintain steady growth; In terms of lithium battery materials, its own 50000 ton high nickel precursor project will be put into operation soon; The annual production capacity of BAMO is expected to increase to about 100000 tons, and the production capacity of the joint venture project is released steadily. In terms of nickel resources, under the pressure of the epidemic, the Huayue project has been successfully put into operation. It is expected to reach the production capacity in mid-2022, and the annual amount of nickel metal is expected to contribute 30000 tons of equity production; Huake project is expected to be put into operation in mid-2022 and Huafei project is expected to be completed in the second half of 2023. Under the concept of “ten-year goal and five-year completion”, the production capacity of nickel resources and lithium battery materials is expected to accelerate greatly. With the current integration of the whole line, in the future cost competition environment, the company is expected to continuously improve the market share with the advantage of low cost, and realize the growth leap of “profit from resources and performance from materials”.
Risk tips: product price fluctuation risk, intensified market competition, new projects are not as expected, etc.
