TINCI(SZ:002709) Orient Securities·2024-06-28 01:31Investment Rating - The report gives a "Buy" rating for the company for the first time, with a target price of 20.16 CNY based on a 2025 PE of 18 times, leading to a total market value of 38.52 billion CNY [1][3]. Core Views - The profitability of the electrolyte is expected to stabilize at the bottom, with the industry capacity accelerating to clear out excess supply. The current price decline cycle has lasted over two years, with major electrolyte companies experiencing historical low gross margins. The price of lithium hexafluorophosphate, a key cost component, has reached historical lows, leading to significant losses and even shutdowns in production for some companies. Factors such as rigid costs of lithium carbonate, substantial reductions in effective industry capacity, and a recovery in downstream demand are expected to support a trend reversal in electrolyte and lithium hexafluorophosphate prices, entering a new phase of stable development [1][18][21]. - The company has built core competitiveness through deep vertical integration. As a leading domestic electrolyte producer, the company continuously enhances its self-supply ratio of core raw materials like liquid lithium hexafluorophosphate and lithium bis(fluorosulfonyl)imide, while also leveraging unique liquid lithium salt technology to maintain significant cost advantages and strong profitability resilience amid industry challenges. The company occupies a dominant market share [1][26]. - The company is diversifying horizontally to create sustainable development capabilities. The new lithium salt and additive layouts in the electrolyte segment are entering a harvest phase, contributing new growth momentum to the main business. The company has also expanded into other battery materials, creating strong platform synergies across various business segments [1][31]. Summary by Sections Financial Performance - The company's revenue in 2023 was 15.405 billion CNY, a decrease of 31.0% year-on-year. The operating profit was 2.343 billion CNY, down 65.9% year-on-year. The net profit attributable to the parent company was 1.891 billion CNY, a decline of 66.9% year-on-year. The earnings per share for 2023 was 0.99 CNY, with a gross margin of 25.9% and a net margin of 12.3% [2][15]. - The forecast for earnings per share from 2024 to 2026 is 0.63 CNY, 1.12 CNY, and 1.60 CNY, respectively, indicating a recovery trend in profitability [1][2]. Industry Overview - The electrolyte industry is characterized by significant cyclical attributes, with historical volatility in profitability. The current downturn has been exacerbated by rapid declines in lithium carbonate prices and slowing demand growth. The report anticipates a recovery in the industry as supply-side adjustments take place [1][18]. - The price of lithium hexafluorophosphate, which constitutes a significant portion of electrolyte costs, is expected to stabilize and potentially rebound due to cost rigidity and a reduction in effective production capacity [1][21][23]. Company Strategy - The company has implemented a strategy of vertical integration, achieving high self-supply ratios for key raw materials, which enhances supply stability and cost competitiveness. The self-supply ratios for lithium hexafluorophosphate and lithium bis(fluorosulfonyl)imide exceeded 93% in 2023 [1][26]. - The company is also focusing on creating a circular economy model, utilizing by-products from one process as raw materials for another, significantly reducing costs associated with raw material procurement and hazardous waste treatment [1][27].