\u3000\u3 Guocheng Mining Co.Ltd(000688) 148 Guangdong Fangyuan Environment Co.Ltd(688148) )
The demand for ternary precursors is growing, the requirements for industrial control accuracy are high during the technical iteration period, and the customer stickiness is strong. Benefiting from the development of global new energy vehicles, the future demand of ternary precursors will enter the fast lane. As the key material for the production of ternary cathode, ternary precursor mainly controls the ammonia concentration, pH value, reaction time, reaction atmosphere, solid content, flow, impurities and other indicators in the process, which will affect the performance of the cathode material and need to be accurately controlled. Therefore, entering the supplier needs strict certification to make its customers sticky and optimize the competition pattern. Among them, NCA has higher energy density and lower cobalt content than NCM precursors, which makes the cost of raw materials lower. However, NCA is difficult to prepare due to the chemical characteristics of aluminum. At the same time, the preparation of high nickel NCM and NCA is more sensitive to temperature and humidity, which makes the production cost higher.
China’s NCA precursor is leading, and NCM business is gradually increasing in volume
The company is a leading manufacturer of NCA cathode material precursors for lithium batteries in China. Relying on the advantages of high-quality control + technology, the company entered the Panasonic industrial chain in 2017, accounting for about 20% of Panasonic’s demand for ternary precursors. In 2021, Panasonic changed the mode of cooperation and adopted nickel beans and cobalt beans with higher metal content. The simplification of the process reduced the net profit per ton. NCM business: continue to expand customers, gradually narrow the profit gap with the head of the industry, and expand production capacity to meet customer needs. In terms of waste battery recycling, Veolia Jiangmen, which cooperates with Veolia, has been completed and put into trial production by the end of 2021.
Development opportunities:
1. Customer – bind Panasonic, extend the positive pole backward, and the share is expected to increase under capacity expansion
Panasonic is expanding its production capacity under the background that Tesla 4680 battery is about to expand, while its cathode supplier expands its production slowly (completed in 25 years) and is unable to meet its mass production demand in time. We expect that most of the increment will be provided by Fangyuan. At the same time, the company’s production expansion projects include 10000 tons of battery grade lithium hydroxide and 6000 tons of battery grade lithium hydroxide monohydrate. We expect that the company may transform from ternary precursor supplier to ternary cathode supplier in the future to realize integrated supply to Panasonic.
2. Cost technology, reducing raw material requirements and matching multi-channel supply will become the key to cost reduction in the medium and long term
For the precursor industry, the short-term technology iteration obtains excess returns, and the medium-term competition cost is almost the only way out. At present, the cost of three sources of nickel sulfate is: nickel bean / nickel powder nickel intermediate nickel containing waste. The same industries such as Zhongwei and Huayou are developing towards vertical integration. The company reduces the requirements of raw materials by virtue of self-developed “impurity extraction without nickel extraction” technology, uses intermediate nickel products, and arranges a battery recovery system to reduce the manufacturing cost of high-purity nickel sulfate. It is estimated that the proportion of metal nickel / cobalt from Veolia Jiangmen waste battery recycling in the company’s 23 years is expected to reach 11%.
Profit forecast
We expect that the company’s NCA shipments will be 22000 / 3.442000 tons and NCM shipments will be 17000 / 3.545000 tons from 2022 to 2024. It is estimated that the operating revenue from 2022 to 2024 will be 4.225/83.84/10.575 billion yuan, a year-on-year increase of 104% / 98% / 26%, and the profit will be 160 / 4.6/610 million yuan, a year-on-year increase of 145% / 183% / 32%. Considering that the company is expected to rapidly increase its volume in 23 years, the valuation of the company in the contract industry is concluded, and the company is given peg0 for 23 years 20x, corresponding to the share price of 33.11 yuan, with a “buy” rating for the first time.
Risk tips: customer expansion risk, technical route change risk, capacity expansion risk, restricted stock lifting risk, short-term stock price fluctuation risk.
