\u3000\u3000 Zhejiang Huayou Cobalt Co.Ltd(603799) (603799)
The cognition of Zhejiang Huayou Cobalt Co.Ltd(603799) has changed from “cycle growth” to “super growth”. Lithium battery materials will contribute major profits to the company in 2022. The company’s future profits do not come from the price elasticity of nickel and cobalt, but rely on the first mover advantage of the layout of Indonesian nickel ore & Park & smelting, the path advantage of laterite nickel ore hydrometallurgy and the price difference formed by its own cost control to bring rich profits and weaken the periodicity of price cycle fluctuation on performance. What Huayou is shaping and the strongest ability in the future is the ability to bear price cuts rather than price increases.
The trial production of nickel and cobalt hydrometallurgy is successful and enjoys the benefits of laterite nickel hydrometallurgy α, Build a green mountain in the field of lithium battery materials. From 2018, the company will first release Indonesia Industrial Park, nickel mine equity + energy, and actively layout nickel cobalt smelting projects such as Huayue, Huake and Huafei. With the successful commissioning of the first line of the Huayue project in November 2021, the project will be determined. We are more optimistic about the hydrometallurgy of laterite nickel ore – nickel cobalt for battery has more prominent advantages. The wet route is significantly better than the fire method in terms of cost (and potential cost rise), and has great advantages over the fire method in terms of carbon emission. The future pyro high matte nickel sulfate path defines the marginal cost of nickel sulfate, while the low-cost wet path earns at least an excess return lower than the pyro path cost. For Huayou, at least earn an excess profit of US $4000-5000 per gold ton.
The precursor capacity expanded rapidly, and the positive ternary + iron lithium was actively arranged. The technology premium of ternary precursor industry will be significantly narrowed, and the industry competition mainly focuses on the cost of raw materials. The company continues to accelerate with the goal of “ten-year task and five-year completion”. If the company’s fund-raising, investment and construction are successful, according to the existing plan, the company is expected to form a production capacity of 380000 tons of ternary precursor in 2023. The company continues to sign huge supply agreements with downstream customers such as rongbai, dangsheng and Funeng, providing a paradigm for subsequent sustainable growth. In 2021, the company completed control over BAMO with a valuation of 3.5 billion; In addition, the company also has active layout in lithium iron phosphate, lithium ore and other fields.
Ternary material integration links shape the company’s high competitive barriers. From resources to materials, Huayou integration has dealt a dimension reduction blow to material processing enterprises and formed a profit safety cushion before the fair price. In addition, the company has the ability to ensure supply and price. With the release of capacity + continuous orders, the company is entering a deterministic growth stage.
Investment suggestion: the company is actively developing from the global leader in cobalt industry to the global leader in lithium battery materials, and the integration link is significantly accelerated. With the gradual release of the company’s production capacity, the company’s performance is expected to maintain high-speed growth. We expect the company to realize a net profit attributable to the parent company of RMB 3.941/60.09/7.876 billion from 2021 to 2023, with a net profit growth rate of 238% / 53% / 31% respectively. It is given a “Buy-A” investment rating for the first time, and the six-month target price is RMB 147.61, corresponding to 30 times the dynamic P / E ratio in 2022.
Risk tips: the sales volume of new energy vehicles is lower than expected, the industry competition is intensified, the production capacity construction progress is lower than expected, and there are deviations in assumptions and calculations