Leaping Over 280 Billion: Does The Valuation Logic Of Lithium Stocks Match Those Of Liquor Stocks Behind The 200 Yuan Closing Of Ganfeng Lithium Industry?

On July 22, the craziness of lithium battery once again swept the screen, and the lithium index rose by 5.59%. Ganfeng lithium industry closed at 200 yuan, with a total market value of 287.4 billion yuan. At the end of June, the company's share price was 120.88 yuan.

"In the last cycle, we did have capacity ahead of demand, but after years of digestion, overcapacity has improved. I think the industry must try to keep up with the market. " At an exchange event organized by Goldman Sachs in May, Kent masters, chairman of the board of directors of the global lithium industry giant Abbott, said.

His judgment is gradually being verified. Taking the domestic market as an example, on the one hand, the penetration rate of new energy vehicles is increasing month by month; on the other hand, the production and sales of midstream materials and power batteries are full; and the supply of lithium resources in the upstream is in short supply, thus starting the "ore grabbing war".

Considering that the supply and demand tension in the second half of the year may further escalate, Guotai Junan this week raised the price of lithium carbonate in the second half of the year to 180000 yuan / ton, which was 100% higher than the current price.

The current situation and expectation of the above industry, combined with the statement profits of companies such as "the two giants of lithium industry", began to enter the cash stage, which once again provided external conditions for the recent rise of lithium mining stocks, which was particularly prominent in July this year.

According to the statistics of 21st century economic report, from July 1 to 21, the average growth of lithium, electrolyte, power battery and new energy vehicle plate was 23.1%, 14.56%, 8.16% and 3.27%, respectively. The growth of lithium stocks was significantly higher than that of other industrial chains.

From June this year, the average increase of 12 stocks included in wind lithium plate has exceeded 50%.

The continuously rising stock price makes the valuation logic based on the expected profit value and P / E ratio no longer applicable, because many companies have calculated the company's profit to 2022 or even 2023 according to the current stock price.

One view is that in the face of higher and higher P / E ratios, institutions, including institutions, have begun to favor the discounted cash flow valuation method, which is based on relatively certain growth in the next few years, while the last widely used sector is liquor stocks.

Whole industry chain growth

In early July, when Ganfeng lithium industry, the industry leader, challenged a new high, some insiders reported that "the data of new energy vehicles need to be paid attention to."

The data mentioned refers to the penetration rate of new energy vehicles. According to the data of the National Joint Conference on passenger car market information, as of June this year, the penetration rate of new energy vehicles has reached 14%, and the penetration rate from January to June is 10.2%, which is far higher than the 5.8% in 2020.

The above data is beyond the expectation. When the threshold of 10% is reached, the market generally believes that new energy vehicles will enter a period of rapid growth. Although it is still a higher prediction that 20% will be reached by 2025, the growth trend is difficult to reverse.

Under the above background, the power battery and its positive and negative electrodes, diaphragm and other direct material enterprises, capacity utilization rate increased significantly, in the state of full production and full sales.

According to industry data cited by Xiangcai securities, the cumulative installed capacity of power batteries in China from January to June 2021 is 52.49gwh, a year-on-year increase of 200%, and an increase of 74.9% compared with the cumulative installed capacity of 30.01gwh in the same period of 2019.

About 80% of the cost of power battery comes from raw materials. Lithium iron phosphate is needed as cathode material and lithium hexafluorophosphate is required for electrolyte.

In contrast, the upstream lithium industry supply, after experiencing a high decline in 2018, the production capacity of lithium salt enterprises has increased in the past two years, but the lithium supply is limited. On the contrary, some Australian mines have withdrawn their production capacity due to the price of lithium concentrate falling below the cost line.

The price of lithium ore, lithium carbonate and lithium hydroxide increased correspondingly due to the high demand and insufficient supply elasticity.

On the whole, the price of lithium carbonate remained high and stable in the second quarter, while the price of lithium hydroxide and lithium concentrate increased in the current period. The average price of lithium hydroxide in the second quarter of this year was 86400 yuan / ton, which was far higher than 48300 yuan / ton and 60500 yuan / ton in the third and fourth quarters of 2020.

It should be pointed out that the domestic lithium industry leaders have previously controlled considerable lithium resources by means of acquiring equity and signing underwriting agreements, so the cost side is relatively controllable. The rise of product price directly drives the improvement of enterprise profit margin.

Although the semi annual report has not been officially disclosed so far, the specific gross profit rate data can not be seen. However, referring to the data given by Abbott, the profit margin of companies with cost level in the first echelon can reach 40% to 45%.

It is also driven by the rising prices of products that Ganfeng lithium industry and Tianqi Lithium Industry Co., Ltd. collectively revised the first half year report performance forecast, and the profitability of the second quarter continued to improve month on month.

According to the expected results, Ganfeng lithium's net profit in the second quarter was close to 1 billion yuan, while in the first quarter of this year, the company's net profit was only 476 million yuan.

After the logic of product price rise driving performance growth has been verified, lithium index and salt lake lithium extraction index started to rise again this week after a short break.

Star fund managers "group" approach

If we say that the performance growth brought by the improvement of the whole industry chain is the foundation, the rise of stock price also needs the promotion of capital and market sentiment.

Lithium stocks are popular.

"Public offering champion" Zhao Yi increased his position in Ganfeng lithium industry in the second quarter, while Guangfa fund Feng Mingyuan entered Tianqi lithium industry and Yahua group in the second quarter.

The Agricultural Bank of China Huili fund holds 13.4632 million shares of Ganfeng lithium industry. As of July 20, the company's shareholding data has increased to 18.701 million shares.

Compared with the data, we can see that the fund's shareholding is mainly concentrated in the four funds managed by Zhao Yi. In 2020, the Agricultural Bank of China Huili industry 4.0 hybrid fund, which he is in charge of, won the market champion with 166.56% income, setting a record of the champion fund in the past four years.

In the second quarter, in addition to the above-mentioned ABC Huili industry 4.0 hybrid fund, the three funds managed by Zhao Yi, such as the new energy theme fund and the research selection fund of Agricultural Bank of China, were all in a state of increase, of which the number of shares held by the new energy theme fund increased from 8.0324 million shares to 12.2352 million shares.

Feng Mingyuan started Tianqi lithium industry in the second quarter.

As of July 22, Cinda's fund held 7.05 million shares of Tianqi lithium, of which 6.7 million were from seven funds managed by Feng Mingyuan.

The fund also holds 14.58 million shares of Yahua group, which is also new in the second quarter, and most of its positions are concentrated in the fund managed by Feng Mingyuan.

In the current period, the holdings of public funds in Tianhua super net also increased by about 80% compared with the first quarter, and the total number of shares held reached 45.12 million shares.

Tianhua super net is the company with the highest increase among the 12 lithium mining stocks since June. During the period, the 102% increase was far more than the industry average of 50%, and institutional investors obviously contributed a lot.

From the perspective of institutional trends in the second quarter, Baijiu stocks have become the mainstream, and the outflow of funds is bound to choose the replacement of other growth confirmed sectors, such as lithium batteries, photovoltaic and chips, which have been rising systematically recently.

Will share prices continue to soar?

The prospect of the industry has considerable increment, and the profit trend is definitely increasing, which is the favorable condition for lithium mining stocks. However, after the concentrated rise in the second quarter, the risk accumulated by the rapid rise of valuation level can not be ignored.

Taking Ganfeng lithium as an example, the estimated net profit in the first half of the year is 1.45 billion yuan (median). At present, the consistent profit of wind seller is expected to be 2.137 billion yuan in 2021, 2.951 billion yuan in 2022 and 3.617 billion yuan in 2023.

In terms of the industry trend, 2.137 billion yuan is actually underestimated. Considering the product prices and profit margin factors in the third and fourth quarters, the company's profit margin will probably exceed this level in the whole year.

So, we may as well calculate with the highest estimated value in 2023, the net profit of 3.6 billion yuan can be converted into earnings per share of about 2.5 yuan. According to the stock price of 200 yuan on July 22, it is equivalent to 80 times of valuation.

This is the result of using the expected value of earnings in the next two years. Therefore, the method of price earnings ratio valuation has begun to no longer apply to lithium stocks. Institutions that choose to continue to buy need to find a new reason to convince themselves.

One market view is that institutions are using discounted cash flow to value hot track stocks.

This method can estimate a market value growth space according to the development of the industry and enterprise in the next few years, as well as the profit expectation, and finally get an estimated value combining with the market style preference.

In other words, the current share price, including the above lithium stocks, does not represent the profit expectation in 2021, but has "priced" the performance of the next three years in advance.

Previously, liquor companies used the valuation logic more often. Considering the relatively certain growth of new energy vehicles, the institution began to apply this method to lithium battery industry chain companies.

For the second half of the year, including the industry, institutional investors are still very optimistic.

According to the data of CAAC, the production and sales of new energy vehicles from January to June this year were 1215000 and 1206000 respectively.

In terms of historical data, after entering the peak consumption season, the sales volume in the second half of the year is generally higher than that in the first half of the year. In this regard, the annual sales volume of CAAC is expected to be 2.4 million vehicles, and the expected value given by some industry research institutions is as high as 2.6 million vehicles, or even 2.8 million vehicles.

As long as the above trend is maintained, the installed capacity of power batteries will increase synchronously, thus driving the demand and consumption of upstream lithium resources. This can be seen from the month on month increase of lithium iron phosphate operating rate in July and the capacity of cathode materials to be released. In this regard, some organizations think that the demand in the second half of the year may increase by 50% compared with the first half year.

On the supply side, lithium production capacity has increased a lot in recent years, but the upstream supply increment is very limited. Although some Australian mines have announced to restart, they are expected to wait until the end of 2021 or even 2022 for capacity increase.

"The second half of 2021 is the most tense period of supply and demand in lithium industry in recent years." Guotai Junan's recent research paper caused heated discussion in the investor community of lithium battery stocks.

In the view of the agency, the recent loosening of lithium carbonate price marks the second round of rise in lithium price. In this regard, the price of lithium salt in the second half of the year has been raised to 180000 yuan / ton, which was a record high. This price is slightly exaggerated, but the situation of tight supply and demand does exist, and may further escalate.

?