Tengyuan cobalt industry (301219)
China’s leading cobalt salt manufacturer. Tengyuan cobalt new materials Co., Ltd. is a rare cobalt salt manufacturer in China who can independently plan, design and manufacture copper cobalt hydrometallurgy production line. Founded in 2004, the company’s core products are cobalt salt and electrodeposited copper. The company’s main production bases are located in the Democratic Republic of the Congo (DRC) and Ganzhou, China. The wholly-owned subsidiary of the Congo is responsible for the procurement of raw materials and rough processing of intermediate products, and the Chinese factory is responsible for the deep processing of cobalt salts and other metal products. The company has excellent comparative advantages and strong growth attributes in the industry. The growth and development of the company is highly matched with the continuous expansion of the new energy cycle.
The company has entered a period of structural expansion, and its profitability and market share may continue to improve. The scale of new energy market continues to expand, and the growth of the company resonates with the expansion of the industry. As a listed enterprise with the best growth in China’s Cobalt industry, the company’s revenue scale had an average annual compound growth rate of 46.2% from 2016 to 2021. Given that cobalt and copper products account for more than 90% of the company’s total revenue, the effective increase of cobalt and copper production capacity or boost the company’s business scale to 10 billion by 2024 (compared with 21 + 117% and 20 + 400%). In addition, considering the scale effect brought by the release of the company’s production expansion projects, combined with the characteristics of continuous optimization of the company’s historical gross profit margin of cobalt and copper business, we expect the company’s gross profit margin to increase to 43.56% by 2024, and the market share of the company’s cobalt products is expected to increase from 5.7% to more than 15%.
Build industry leading advantages in multiple dimensions and strengthen growth attributes to resist the risk of cyclical fluctuations. The company has technical and technological advantages (independently designing and manufacturing smelting equipment and production lines), cost advantages (the average cost of cobalt manufacturing per unit in recent four years is 62% of that of Companies in the same industry), resource stability advantages (strong supply network and mining right expansion), business model advantages (flexible production and direct sales), team stability advantages (the team has more than ten years of cooperation experience and clear management system) Customer advantage (the well-known customer group is stable and extensive, and the market share has the basis for expansion), growth advantage (cobalt salt and copper production capacity + 208% and 200% respectively). The company’s diversified advantages and structured growth attributes can resist cyclical fluctuation risks to a certain extent.
The company has strong industry comparative advantages, and the gross profit level is highly related to the price of main products. Industry comparability analysis shows that the company has relatively better growth, profitability and operation ability. The risk analysis of main product output and price fluctuation shows that the company’s comprehensive gross profit margin is more sensitive to price changes. If the annual average price of cobalt and copper decreases by 10% / 20% / 30% compared with the benchmark situation, the company’s comprehensive gross profit margin may decrease to 35.2% / 27.3% / 17.4%.
Profit forecast and rating suggestions of the company: considering the good prospect of demand in the battery field and the expansionary demand brought by new energy infrastructure, the continuation of the tight balance between supply and demand in the cobalt copper industry may boost the high price. Combined with the company’s comparative advantages in the industry and the expansion advantages of future production capacity, we expect the company to achieve an operating revenue of RMB 7.069/89.39/11.101 billion from 2022 to 2024, with a year-on-year increase of 69.9% / 26.5% / 24.2%; The net profit attributable to the parent company was RMB 1.922/2.53/3.307 billion, with a year-on-year increase of 67.1% / 31.7% / 30.7%; Corresponding to PE11 4/8.6/6.6。 For the first coverage, give a “recommended” rating. Risk warning: the risk of sharp retreat of metal price, the risk of less than expected capacity release, the risk of slowing market growth or declining demand, overseas operation risk, and the risk of impairment of accounts receivable and inventory.
