Minsheng Securities: Give Salt Lake shares a buy rating

2022-01-20Minsheng Securities Co., Ltd. Qiu Zuxue, Zhang Hang conducted a study on Salt Lake shares and released a research report "Salt Lake Shares Annual Report Performance Forecast Review: Sales Decline and Subsidiary Bankruptcy Drag Down Performance, Optimistic about 2022 Performance Release", This report gives a buy rating to Salt Lake Shares, and the current stock price is 27.06 yuan.

Salt Lake Shares (000792)

Event Overview: On January 19, the company released its 2021 performance forecast, which is expected to be 3.88-4.28 billion yuan, an increase of 90.24% – 109.85% year-on-year, deducting non-attributable net profit of 38.3-42.3 billion, an increase of 78.25% – 96.87% year-on-year, and basic earnings per share of 0.7142 yuan / share – 0.7878 yuan / share.

Analysis and judgment:

Q4 sales decline and bankruptcy liquidation of subsidiaries were the main reasons for the lower than expected performance. In a single quarter, the net profit attributable to the mother in Q4 was 165 to 565 million yuan, a sharp increase year-on-year to turn around the loss, down 64.7% to 89.7% month-on-month, and the performance was lower than our expectations. We believe that the reasons for the company's performance change are: 1) the main product Q4 sales decline: in 2021, the company's potassium chloride production is about 5.02 million tons, sales volume is about 4.65 million tons, and the cumulative library is about 370,000 tons; according to the company and Keda Manufacturing, the company's lithium carbonate production in 2021 is about 22,700 tons, and the sales volume is about 19,200 tons, and we estimate that the company's Q4 lithium carbonate production is 6,400 tons, down 17.9% month-on-month, sales volume is 4200 tons, down 44.7% month-on-month, and about 3,500 tons in 2021. The decline in sales of potassium chloride and lithium salts and the accumulation of accumulation affected the company's 2021Q4 performance release. 2) Bankruptcy liquidation and fines of subsidiaries: The bankruptcy liquidation of the company's indirect holding subsidiary nitrate industry is expected to reduce the company's net profit in 2021 by about 600 million yuan; the wholly-owned subsidiary Salt Lake Energy is expected to pay 195 million yuan for ecological environment restoration and treatment and ecological environment damage compensation, which is expected to reduce the company's profit in 2021 by about 111 million yuan, while returning the mining income to affect the annual profit of 357 million yuan.

The price of potassium chloride and lithium salt is high, and the company's performance release in 2021 may be good. As of January 19, 2022, the tax-inclusive prices of Qinghai Salt Lake of potassium chloride (57% powder) and potassium chloride (60% powder) were 3350 and 3490 yuan / ton, respectively, an increase of 281 yuan / ton compared with the average price of Q4; according to The Asian Metal Network, the average price of industrial lithium carbonate including tax was 325,500 yuan / ton, an increase of 132,700 yuan / ton compared with the average price of Q4, an increase of 69%. We believe that the company's potassium chloride and lithium salt stocks are worth looking forward to in 2022 under high prices.

The company's salt lake lithium expansion is smooth, and the future may usher in large-scale expansion to ensure the company's future performance growth.

1) The company has formed a "1+2+3" salt lake lithium extraction project, including Lanke Lithium, a joint venture with Keda Manufacturing, and a salt lake BYD joint venture with BYD, of which Lanke Lithium has reached production in the first phase and the capacity climb in the second phase, and Salt Lake BYD is in the pilot stage. 2) The company emits 200,000-300,000 tons of LiCl per year from old halogen, which may support the large-scale expansion of lithium extraction capacity in the future; 3) The company signed the "Strategic Cooperation Framework Agreement" with Guoxuan Hi-Tech to establish a joint venture company for the production of lithium iron phosphate and other cathode battery materials and energy storage batteries to ensure future performance growth.

The strategic position of food security is prominent, the global supply and demand pattern of potash fertilizer is good, the price may be high for a long time, and the company will benefit significantly. In the long run, the new discovery of potash mines is small, the project production progress is expected to be low, and the growth rate of potash fertilizer supply is slowing down, but the contradiction between sustained population growth and the decline in per capita arable land area will support the long-term demand for potash fertilizer; in the short term, the importance of grain under sanctions, epidemics and volcanic eruptions in Belarus is prominent, and it is expected that potash prices will remain high.

Investment advice: We adjusted the company's 2021-2023 attributable net profit forecast to 4.017, 75.66 and 8.915 billion yuan, based on the closing price on January 19, 2022, corresponding to PE of 39X, 21X and 18X respectively, and maintained the company's "recommended" rating.

Risk warning: the price of potash fertilizer and lithium salt has fallen sharply; the production progress of Lanke Lithium industry is lower than expected.

A total of 9 institutions have given ratings in the last 90 days, 6 buy ratings and 3 overweight ratings; the average target price of institutions in the past 90 days has been 36.85; the Securities Star Valuation Analysis Tool shows that Salt Lake (000792) good company rating is 2 stars, good price rating is 1 star, and valuation comprehensive rating is 1.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)