\u3000\u3000 Sichuan Yahua Industrial Group Co.Ltd(002497) (002497)
Event overview: on January 12, the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company is RMB 920-1.05 billion, a year-on-year increase of + 184-224%, deducting the net profit not attributable to the parent company of RMB 892-1.022 billion, a year-on-year increase of + 198-242%.
Analysis and judgment:
Civil explosion is the shield, lithium salt is the spear, and the increase of lithium business volume and price helps the company’s performance growth. In a single quarter, the net profit attributable to the parent company of Q4 was 288 ~ 418 million yuan, with a significant year-on-year increase of 122 ~ 222% and a month on month change of – 4.7% ~ + 38.3%. Reasons for performance changes: 1) price: the price of lithium salt was high in 2021, and Q4 battery grade lithium hydroxide increased by 61.6% month on month, significantly thickening the company’s profit; 2) Volume: the company’s lithium salt production line continues to climb the slope and increase the volume after reaching the production line. At the same time, the company seizes the industry opportunity to increase sales, and the lithium salt sales have increased significantly; 3) The civil explosive business develops steadily and continues to contribute stable profits to the company.
Lithium hydroxide smelting capacity continues to expand and customer structure continues to be optimized. 1) In 2021, the company has a capacity of 43000 tons of lithium salt, including 33000 tons of lithium hydroxide, 50000 tons of battery grade lithium hydroxide in phase II of Ya’an lithium industry (including 30000 tons of battery grade lithium hydroxide production line to be completed and put into operation by the end of 2022), and 11000 tons of lithium chloride and its products have been started, By 2025, the company’s comprehensive capacity of lithium salt products will reach more than 100000 tons. 2) The client has been successfully embedded into global high-quality supply chains such as Tesla, Panasonic and LG, which confirms the excellent product quality of the company. With the continuous volume of overseas high nickel models in the future, the company’s performance will be released quickly.
The layout of lithium resources is progressing smoothly, and several equity participation projects are expected to be put into operation in 2022. The company’s existing lithium resource supply channels can meet the needs of lithium salt production in 2022: 1) Lijiagou: participate in 28% of Lijiagou lithium mine and have the priority supply right, which can ensure the demand of the holding subsidiary Guoli company; 2) Core: participate in 4.18% equity of core Australia and sign the lithium concentrate underwriting agreement (75000 tons of lithium concentrate / year). Core has started mine construction and is expected to mine in 2022q4; 3) It has participated in 5.01% of the equity of Eastern resources Australia, and has signed a strategic cooperation agreement. The company has locked in the lithium target with Eastern resources and will continue to cooperate in the development of lithium resources; 4) Participate in 9.5% equity of EV resources Australia, and jointly develop lithium resources projects such as Xiaohe lithium tin tantalum project in Australia, weinbeni project in Austria and lithium mine in the eastern Alps; 5) Renew the lithium concentrate underwriting agreement with Galaxy lithium until 2025. Galaxy lithium provides no less than 120000 tons of lithium concentrate every year, which will provide long-term, stable and high-quality raw material guarantee for the company’s future production.
4680 and new energy density regulations or favorable power ternary development, continue to be optimistic about the demand for lithium hydroxide.
1) the main advantages of 4680 are reflected in battery capacity, production cost and efficiency. Its application in ternary battery will significantly open the gap with lithium iron phosphate battery. (2) The electronic information department of the Ministry of industry and information technology issued and publicly solicited comments on the industry specification conditions for lithium ion batteries (version 2021), which requires that the energy density of energy type power batteries should be ≥ 180 WH / kg and the energy density of battery packs should be ≥ 120 WH / kg, or benefit the development of ternary batteries and increase the demand for lithium hydroxide in the future.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 983 million, RMB 1894 million and RMB 2378 million respectively. Based on the closing price on January 13, 2022, the corresponding PE will be 26x, 14x and 11x respectively. It will be covered for the first time and the company will be rated as “prudent recommendation”.
Risk warning: the demand for civil explosive business is less than expected; Lithium prices fell sharply; The project is not progressing as expected
