\u3000\u3 China Vanke Co.Ltd(000002) 240 Chengxin Lithium Group Co.Ltd(002240) )
Investment Event: the company released the first quarterly report of 2022. In the first quarter of 2022, the company realized an operating revenue of 1.687 billion yuan, a year-on-year increase of 212.59%; The net profit attributable to shareholders of listed companies was 1.07 billion yuan, an increase of 900.96% year-on-year; The net profit attributable to the parent company after deducting non-profit was 1.069 billion yuan, a year-on-year increase of 951.86%; Earnings per share reached 1.24 yuan, a year-on-year increase of 785.71%.
Lithium salt prices accelerated and the company’s profitability increased. The price of lithium salt accelerated in 2022q1, and 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. During the reporting period, the price rise of lithium salt far exceeded the price rise of lithium concentrate in Australia in the same period, further driving the price difference between lithium salt and lithium concentrate, driving the business performance release elasticity of the company’s lithium sector to increase, and making the company’s single quarter performance in 2022q1 reach a record high.
Lithium salt production capacity continues to expand and expand the global production and supply base. At present, the company has built a lithium salt production capacity of 70000 tons, a metal lithium production capacity of 400 tons, and a lithium salt production capacity of 60000 tons under construction. In China, the production capacity of 25000 tons of lithium carbonate and 15000 tons of lithium hydroxide of Zhiyuan lithium industry has fully reached the production capacity, and the production of 40200 tons of lithium salt has been realized in 2021; Suining Shengxin’s 30000 ton lithium hydroxide production capacity has been completed and put into operation in January 2022, and will contribute lithium salt increment to the company this year. Overseas, the company’s holding Sun company Indonesia Shengtuo 50000 tons of lithium hydroxide capacity and 10000 tons of lithium carbonate capacity are under construction and are expected to be completed and put into operation in 2023. In terms of metal lithium, the company’s Shengwei lithium industry has an annual output of 1000 tons. The planned production capacity of phase I of the metal lithium project is 600 tons. At present, the production capacity of 400 tons has been built, and the remaining production capacity is under active construction.
The upstream resource side launched multi-point attacks, and the diversified resource guarantee system was formed. Aoyinuo mining, a subsidiary of the company (holding 75%) has a production capacity of 405000 tons of raw ore, equivalent to 75000 tons of lithium concentrate, and 41800 tons of lithium concentrate will be produced in 2021; In addition, the Chinese company has purchased 100% equity of Sichuan Liuxin survey, planning and Design Co., Ltd., and its shareholding in Huirong mining has increased to a total of 25.19%. Under the background of China’s policy of accelerating the development of lithium resources this year, Huirong mining is expected to complete the exploration and conversion to mining; During the reporting period, the company also signed a strategic cooperation framework agreement with Guocheng group. The two sides will actively promote the resumption of production of Jinxin mining. The company will advance funds to Jinxin mining to solve the debt problem and resume mine operation, and has the right to obtain no less than 50% of lithium concentrate products of Jinxin mining. Overseas, the company acquired 51% of the equity of Max mind Hong Kong, and its subsidiary Zimbabwe Sun company owns the mining license for a total of 40 rare metal ore blocks of sabixing Lithium Tantalum project. According to the preliminary planning, the designed raw ore production scale of sabixing Lithium Tantalum project is 900000 tons / year, equivalent to about 200000 tons of lithium concentrate, which is expected to be completed and put into operation by the end of 2022; In addition, the company acquired 100% equity of SESA company in Argentina. SESA has the operation right of UT consortium, which operates the sdla project in Argentina. The annual production capacity of the project is 2500 tons of lithium carbonate equivalent, and participated in several initial exploration projects of salt lakes in Argentina through equity participation. In terms of resource underwriting, it has signed long-term off purchase agreements with overseas lithium resource enterprises such as Galaxy lithium and avz mining; In addition, the company subscribed for 3.4% of the total share capital of aby company before IPO through sun Shengyi lithium industry, and signed the off purchase and sales agreement. The kenticha lithium mine under aby company provided the company with no less than 60000 tons of lithium concentrate in the first contract year after investment, and 60 Faw Jiefang Group Co.Ltd(000800) 00 tons of lithium concentrate in the remaining contract years
Introduce strategic investors Byd Company Limited(002594) , and jointly expand the advantages of the industrial chain. At present, the company’s main customers include Contemporary Amperex Technology Co.Limited(300750) , Byd Company Limited(002594) , China Innovation airlines, Ruipu energy, LG Chemical, sko, POSCO chemical, Samsung SDI, Xtc New Energy Materials(Xiamen) Co.Ltd(688778) , BASF Shanshan, Shenzhen Dynanonic Co.Ltd(300769) , Ningbo Ronbay New Energy Technology Co.Ltd(688005) , beiteri and other leading enterprises in the new energy lithium battery industry. During the reporting period, the company plans to introduce Byd Company Limited(002594) as a strategic investor through directional issuance of shares. After the issuance, Byd Company Limited(002594) holds more than 5% of the company’s shares Byd Company Limited(002594) has a wide range of industrial resources of new energy industry, and its global layout is highly consistent with the development direction of the company. The strong cooperation between the company and Byd Company Limited(002594) in the upstream and downstream of the industrial chain will give full play to and make use of their respective advantages to help the company accelerate its development in resource acquisition, new material development and market development.
Investment suggestion: the company’s new lithium salt smelting capacity is steadily put into operation and continuously expanded; Multi point breakthroughs in the layout of lithium resources in the upstream, the establishment of diversified resource guarantee system, and the self-sufficiency of lithium resources will be greatly improved in the future; The downstream company triggered the leader of lithium battery industry Byd Company Limited(002594) as a strategic investor, the powerful United to help the company obtain resources, develop new materials, broaden the market, and accelerate the company’s strategic idea of becoming a global leader in lithium battery new energy materials. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2022 to 2023 will be RMB 3.635 billion and 4.542 billion, corresponding to EPS of RMB 4.20 and 5.25 from 2022 to 2023, corresponding to PE of 8x and 6x 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 release of new production capacity of the company is less than expected; 4) The company’s lithium concentrate resources are in short supply.
