- BUY Entry 90 – Target – 110 Stop Loss – 80
- GANFENG LITHIUM CO., LTD. is a China-based company principally engaged in the research, development, production and sales of deeply processed lithium products. The Company’s main products include lithium compounds, lithium metal and lithium batteries. The Company’s products are mainly used in electrical vehicles, chemicals and pharmaceuticals. The Company distributes its products in the domestic market and to overseas markets.
- Ramp-up in capacity. The company announced that it and its partner Mineral Resources Limited agreed to upgrade the ore processing capacity of Mt Marion spodumene project of the joint venture Reed Industrial Minerals Pty Ltd (RIM). According to the test work results, it is estimated that the spodumene concentrate capacity of Mt Marion spodumene project will increase from 450,000 tonnes per annum to 600,000 tonnes per annum by April 2022. Meanwhile, RIM is planning the second stage of capacity expansion, which plans to expand the current spodumene concentrate capacity to 900,000 tonnes per annum, which is expected to be completed by the end of 2022.
- Stellar FY21 earnings. FY21 Revenue jumped by 103.4% YoY to RMB11.1bn. Gross profit jumped by 282.5% YoY to RMB4.4bn. GPM jumped by 18.6ppts to 39.8%. Net profit attributable to the owners of the company jumped by 409.7% YoY to RMB5.4bn. NPM jumped by 21.6ppts to 49%. The stellar performance was due mainly to the 49% and 14.1% surge in the average selling price of the respective lithium series products and lithium batteries series products. Meanwhile, the company proposed a cash dividend of RMB3 for every 10 shares.
- Lithium carbonate price maintains at a record high. Lithium carbonate prices in China stayed at RMB496,500/tonne as of 11th April due to high global demand and tight supplies. Prices have jumped more than 85% YTD. China is expected to double the EV sales in 2022 to more than 5mn units. Meanwhile, battery producers rush to secure long-term supply contracts with lithium mining companies. The recent sanction on Russia pushed oil prices back to more than US$100/bbl. The outlook for oil is still very bullish. Accordingly, the demand for petroleum vehicles will be further suppressed. On the contrary, the demand for EVs, especially in Europe and the US will be further propelled. As a result, lithium, the main raw material for batteries, is expected to see stronger demands.
- The updated market consensus of the EPS growth in FY22/23 is 58.7%/16.0% YoY, respectively, translating to 13.4×/11.5x forward PE. The current PER is 21.4x. Bloomberg consensus average 12-month target price is HK$198.29.
Ganfeng Lithium Co Ltd (1772 HK) (Source: Bloomberg)