\u3000\u3000 Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
Events
The company released the performance forecast for 2021 on the evening of January 11. It is expected to realize a net profit of 3.7 billion yuan to 4.2 billion yuan in 2021, with a year-on-year increase of 217.64% – 260.56%. In the first three quarters of 2021, the net profit was 2.47 billion yuan, a year-on-year increase of 267.66%.
Commentary
Q4 performance exceeded expectations and profitability improved. 2021q4 achieved a net profit of 1.23 billion yuan – 1.73 billion yuan in a single quarter, and the performance exceeded expectations. At the end of the year, the cobalt price was 495000 yuan / ton, and Q4 increased by 25%; At the end of the year, the copper price was USD 9692 / ton, and Q4 increased by 6%. In 2021, the demand for lithium battery materials remained high, the company’s high-end and integrated business strategy achieved remarkable results, the production and sales of precursors, cathode materials and other products increased, the product sales price continued to increase, and the profitability improved significantly.
The industrial chain layout of “resources + precursors + positive electrode” has gradually taken shape. The first batch of products of Huayue wet process project with an annual output of 60000 tons of nickel and 7800 tons of cobalt have been successfully produced and tested to be qualified. Huake 45000 ton pyrometallurgical project and Huafei 120000 ton wet nickel project are progressing smoothly and will be gradually put into operation from 2022 to 2023. The precursor has signed strategic cooperation agreements with Ningbo Ronbay New Energy Technology Co.Ltd(688005) , Beijing Easpring Material Technology Co.Ltd(300073) , Farasis Energy (Gan Zhou) Co.Ltd(688567) respectively, and the total planned supply volume exceeds 600000 tons. Cathode materials expand the lithium iron phosphate business, acquire shengvanadium technology, plan a production capacity of 75000 tons / year, and invest in the construction of 500000 tons / year production capacity in cooperation with Hubei Xingfa Chemicals Group Co.Ltd(600141) .
Acquisition of Arcadia lithium mine, integration strategy and the next city. According to the announcement on December 22, 2021, the company plans to acquire 100% equity and related creditor’s rights of Zimbabwe prospect lithium mining company for us $422 million through its subsidiary Huayou international mining, so as to obtain 100% equity of Zimbabwe Arcadia lithium mining. The lithium resource of Arcadia lithium mine is 1.9 million tons of LCE, with a grade of 1.06%; Lithium reserves are 1.24 million tons of LCE, with a grade of 1.19%. The project is planned to have an annual output of 147000 tons of 6% spodumene concentrate and 118000 tons of 4% lithium permeable feldspar concentrate. The construction period is 2 years, and the cash cost of concentrate is 357 US dollars / ton.
Profit forecast & investment suggestions
According to the company’s performance forecast in 2021 and the progress of integration project layout, the company’s net profit attributable to the parent company from 21 to 23 will be increased by 34%, 49% and 71% to RMB 3.734 billion, RMB 4.722 billion and RMB 5.772 billion respectively, with corresponding EPS of RMB 3.06, RMB 3.87 and RMB 4.73 respectively, and corresponding PE of 36, 29 and 23 times respectively. Maintain the “buy” rating.
Risk tips
Metal prices fluctuate significantly; The production schedule of new projects is lower than expected; Goodwill impairment risk.
