\u3000\u3 China Vanke Co.Ltd(000002) 497 Sichuan Yahua Industrial Group Co.Ltd(002497) )
Core view:
Investment events: in 2021, the company achieved an operating revenue of 5.241 billion yuan, a year-on-year increase of 61.26%; The net profit attributable to shareholders of listed companies was about 937 million yuan, with a year-on-year increase of about 189.22%; The net profit attributable to shareholders of listed companies after deduction of non profits was about 919 million yuan, with a year-on-year increase of about 207.10%; Earnings per share was 0.82 yuan, a year-on-year increase of 141.18%. In the first quarter of 2022, the company realized an operating revenue of 2.66 billion yuan, a year-on-year increase of 210.22%; The net profit attributable to shareholders of listed companies was about 1.022 billion yuan, with a year-on-year increase of about 121002%; The net profit attributable to shareholders of listed companies after deduction of non profits was about 1.015 billion yuan, with a year-on-year increase of about 130102%; Earnings per share was 0.89 yuan, a year-on-year increase of 119257%.
The prosperity of lithium salt business contributed to the substantial growth of the company’s performance. Driven by the strong demand for downstream new energy vehicles, the price of lithium salt in China rose strongly and unilaterally in 2021. The average price of battery grade lithium carbonate and lithium hydroxide increased by 178% and 104% year-on-year to 122500 yuan / ton and 120400 yuan / ton respectively. With the boom of lithium price and the release of new production capacity of the company, the 20000 ton production line of Ya’an lithium industry phase I is basically in a saturated production state throughout the year, making the output of lithium salt products of the company reach 27300 tons in 2021, with a year-on-year increase of 149.69%; The sales volume of lithium salt products reached 29100 tons, with a year-on-year increase of 66.82%. The simultaneous rise in volume and price of lithium business sector is the main reason for the significant release of the company’s performance in 2021. In 2022q1, the price of lithium salt in China continued to rise rapidly. The prices of battery grade lithium carbonate and lithium hydroxide in China rose from 282400 yuan / ton and 234300 yuan / ton at the beginning of January to 517500 yuan / ton and 497300 yuan / ton at the end of March respectively. In 2022q1, the average price of battery grade lithium carbonate in China reached 424200 yuan / ton, up 470.16% year-on-year and 102.77% month on month; The average price of battery grade lithium hydroxide reached 371700 yuan / ton, up 470.97% year-on-year and 84.47% month on month. The gradual rise of lithium salt product price and sales volume of the company drives the company’s 2022q1 performance to continue to increase significantly.
Holding Canadian lithium projects, the layout of upstream lithium resources has made a major breakthrough. The company shares 13.23% of the equity of Canadian super lithium company, and acquires 60% of the equity of its wholly-owned subsidiary. It controls the Fugen lake hard rock spodumene lithium mine project and Georgia lake hard rock spodumene lithium mine project. The total lithium oxide reserves of the two projects exceed 200000 tons. The company plans to build a lithium concentrate mining and dressing plant with 6% lithium oxide of 200000 tons / year in the first phase, which will continue to operate for no less than 10 years. In the later stage, according to further detailed exploration, The second phase of construction will expand the production capacity to 400000 tons. In addition, the company’s other multi-channel layout upstream lithium resources that participate in shares or sign underwriting agreements will also contribute to the company’s safe and sufficient resource guarantee from 22 years: 1) the energy investment lithium industry with 37.25% of the company’s shares owns the mining right of Lijiagou spodumene mine, and plans to produce 180000 tons of lithium concentrate every year. It is expected to be put into operation in 22 years and give priority to the production and supply of Guoli company, a holding subsidiary of the company; 2) The company has participated in core Australia and signed a lithium concentrate underwriting agreement. It is expected to supply lithium concentrate to the company in 2022q4; 3) The company renewed the lithium concentrate underwriting agreement with Galaxy lithium, which will provide the company with no less than 120000 tons of lithium concentrate every year until 2025; 4) The company shares 3.4% of the equity of aby company in Australia and signs the off take and sales agreement of lithium concentrate. The core assets of aby company are mainly kenticha lithium mine in Ethiopia. It is expected to supply the company with no less than 120000 tons of lithium concentrate every year from 2023q2; 5) The company shares 4.6% of the equity of EFE Australia, has signed a strategic cooperation agreement and locked the lithium target, and will jointly develop lithium resources through joint venture in the future; 6) The company shares 9.5% of the equity of EVR Australia. EVR owns lithium resources projects such as Xiaohe lithium tin tantalum project in Australia, weinbeni project in Austria and lithium mine in the eastern Alps. The company will jointly develop the above resources projects with EVR.
Investment suggestion: as a first-line lithium salt processing enterprise in China, the company has benefited from the rise of lithium salt price and the steady expansion of its smelting capacity, made a breakthrough in the layout of lithium resources at the upstream of the industrial chain, and established a multi-channel lithium resource reserve, which provides a safe and sufficient resource guarantee for the expansion of lithium business in the future. Tesla 4680 battery is expected to be in high volume, which will further drive the sales demand of the company’s lithium hydroxide. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2022 to 2023 will be 3.653 billion yuan and 4.324 billion yuan, corresponding to EPS of 3.17 and 3.75 yuan from 2022 to 2023, corresponding to PE of 9x and 7x from 2022 to 2023, maintaining the “recommended” rating.
Risk tips: 1) the downstream demand for lithium salt has shrunk significantly; 2) Lithium salt prices fell sharply; 3) The construction progress of the company’s new production capacity is less than expected; 4) The price of lithium concentrate rose sharply; 5) The company’s lithium concentrate resources are in short supply.
