[institutional comments] Yongxing material-mica lithium extraction route is mature

Main points of investment

The product volume proves that the mica lithium extraction route is feasible: due to the history of the industry, the market thought that the mica lithium extraction route was uncertain, and the full production of the company's production line was the best proof of the feasibility of the route. The two production lines of the 10, 000-ton battery-grade lithium carbonate project have been put into operation, and the production capacity is better than expected. The sales volume from January to September is 6320 tons, with an output of 5518 tons, of which 3722 tons are sold from July to September, with an output of 2776 tons. The average monthly output in the third quarter has exceeded 900t. It has reached the design capacity target. The quality of lithium mica lithium carbonate produced by the company is stable, and it has been recognized by many leading customers in the downstream industry and achieved long-term supply. The high production capacity shows that the company's products can withstand the extremely low lithium carbonate price in the third quarter. In the environment of cash losses of most enterprises in the industry, the company's lithium salt cost competitiveness highlights, and the prospect of mica lithium extraction route is promising.

The market share of lithium extraction from mica is expected to increase: the production process of lithium carbonate mainly includes lithium extraction from salt lake and lithium from ore, but due to the limitation of resources, technology, development cost and other comprehensive factors, the development speed of lithium extraction from salt lake is relatively slow. at present, the ore extraction process is widely used in the industry. The lithium extraction from ore is divided into lithium extraction from spodumene and lithium extraction from lithium mica. The lithium content in spodumene is generally much higher than that of lithium mica, which is more suitable for the production of lithium-containing raw materials. And because the lithium extraction process of spodumene has been very mature after more than 50 years of development and improvement, the extraction process is easy to control and the product quality is stable and reliable, which has become the most important source of lithium carbonate production at the present stage. On the other hand, lithium extraction from lithium mica, due to a series of congenital and technical deficiencies, has accounted for no more than 5% of the domestic lithium carbonate market supply for a long time, and the proportion is very low. With the development of Yongxing and other enterprises in the industrialization of lithium extraction from mica, the market share of lithium extraction from mica is expected to increase significantly.

The technology of lithium extraction from mica has been improving continuously: lithium extraction from lithium mica has been a difficult problem in industry for a long time. Lithium mica has low grade, large amount of slag and a certain amount of fluorine, which is easy to form insoluble fluoride during smelting, which leads to two problems in the production process. one is that the production equipment is vulnerable to corrosion and the maintenance cost is too high. Second, lithium mica ore contains a lot of other materials and impurities. According to the smelting ratio of lithium mica to lithium carbonate at 18:1, 17 tons of waste slag will be produced for every ton of lithium carbonate produced. If the accumulation of a large amount of waste slag is not properly handled, it will not only cause great harm to the environment, but also endanger the normal operation of the mica lithium extraction production line and further expand production. Although lithium extraction from lithium mica has been faced with many difficulties and challenges for a long time, its separation and extraction technology has been continuously improved with the continuous efforts of industry and academia. At present, the mainstream mica lithium extraction enterprises in the market mainly adopt mixed acid method and sulfate process, especially after the continuous improvement of the technical process, the latter has better solved the problems of long process, high energy consumption and equipment corrosion in the traditional process. At present, Yongxing lithium mica lithium extraction adopts "the integration of compound salt low temperature roasting technology and fluorine fixation technology", and the world's first tunnel kiln roasting, the production efficiency has been further improved.

Yongxing's advantages: on the one hand, by realizing the layout of the whole industry chain from resources, mining, mineral processing to lithium carbonate deep processing, Yongxing already has the potential to become a low-cost production capacity in the industry; on the other hand, the company's technical team has a deep accumulation in the lithium carbonate industry and is in the forefront of the market in terms of industrialization. In addition, relying on flexible and efficient management system, Yongxing has achieved a national leading position in the high-end market of stainless steel rod and wire rod, the three cost control capabilities are excellent, and excellent corporate culture genes are bound to be of great benefit to the successful development of its lithium salt business.

Big inflection point of the industry: at present, the lithium carbonate industry is at an upward inflection point in a large cycle. the state of the industry is that prices are 75% lower than their highs three years ago, most enterprises lose cash flow, investment in fixed assets shrinks, and the demand side benefits from the wave of electric cars. market capacity is expected to grow rapidly in the future. It is expected that the industry boom will bottom out and pick up in the medium term. In the future, with the rebound of industry prices, the profitability of the company's lithium salt business is expected to be significantly improved.

Investment suggestion: the company's traditional business special steel products are customized small batch high-end varieties, gradually establish a competitive advantage and expand market share in many years of industry competition, and the company will continue to upgrade its product structure in the future. to achieve the continuous improvement of the profitability of the special steel plate, in addition, the completion of the technical renovation project is also expected to improve the overall sales of special steel next year. In terms of lithium business, full production and full sales prove the feasibility and competitiveness of the mica lithium extraction route. In the long run, lithium products are expected to benefit from the rapid expansion of the downstream new energy vehicle industry, and the profitability of the lithium carbonate industry is expected to gradually come out of the trough. The company will benefit from it. We estimate that the company's EPS from 2020 to 2022 will be 0.97 yuan, 1.15 yuan and 1.25 yuan respectively, maintaining the "overweight" rating.

Risk hints: the demand for stainless steel is obviously downward; the supply of stainless steel rod and wire rod is deteriorating from the low-end market to the high-end market; and the supply and demand of lithium salt industry continues to deteriorate.