CICC: lithium price persistence is expected to exceed expectations and lithium plate welcomes revaluation opportunity

SMM survey: what kind of metal do you like most in 2022?

From 2022 to 2025, the supply and demand of lithium is tight as a whole, and the high lithium price is both deterministic and sustainable.

We estimate that the balance of global lithium supply and demand from 2021 to 2025 is-0.77,1.15,2.90,1.31 and + 15200 tons LCE, respectively. We believe that even though more new projects will be put into production from 2022 to 2023, the overall supply and demand of lithium is still tight, because lithium resource projects generally need a capacity climbing cycle of half a year to two years according to different resource types and process paths. the effective supply contributed by new production projects is relatively limited. Taking into account the complexity of the development of lithium resources, the long-term progress of new supply is also easy to be lower than the current market expectations, so the duration of supply and demand shortage may still exceed current market expectations.

The bearing capacity of downstream enterprises is difficult to effectively restrict the current lithium price.

From the point of view of the mid-stream materials, the cathode enterprises downstream of lithium salt mainly adopt the cost-plus mode of pricing, so the pressure of lithium salt price increase will be mainly reflected in the battery link. Since September this year, battery companies have begun to transmit cost pressure through price increases. The price of ternary batteries has reached 840 yuan / kwh, which has increased by 24% over the past three months. If the price of lithium carbonate is 250000 yuan / ton, the corresponding gross profit margin is about 12%. Taking into account the subsequent battery price increases, the price reduction of other battery raw materials and the continued cost reduction brought about by design progress, we expect that the profit pressure of lithium salt price increase will be effectively alleviated.

From the point of view of the terminal car factory, the average carrying capacity of a car in 2021 is about 50 kWH, corresponding to the raw material cost of lithium carbonate accounts for about 4% of the cost of the whole vehicle, and the price of lithium carbonate increases by 1% for every 50, 000 yuan per car. Considering that new energy vehicles as a long-term growth track, for batteries and car companies, "ensuring share" will be of more strategic significance than "ensuring profitability". Therefore, we expect that the current bearing capacity of downstream enterprises may be difficult to effectively restrict the lithium price.

The overall valuation of the target of the lithium industry is on the low side, and the investment in the lithium sector in 2022 will focus on "sustainable growth".

After the previous adjustment, we assume that the average price of electric carbon in 2022-2023 is 200000 yuan / ton, and the average PE of the corresponding lithium plate in 2022-2023 is 30x and 22x, respectively, which is significantly lower than the high-growth track where the lithium demand CAGR is as high as 38% in 2021-2025. Considering that lithium prices are already high and the sensitivity of sector valuations to price increases has decreased, we believe that the excess earnings of the lithium sector in 2022 will come from sustainable growth capacity to digest the company's short-term valuation and improve its long-term valuation. We believe that companies with sustainable growth capacity need to meet three major conditions: the first is governance mechanism and entrepreneurship, the second is internalized industrial capacity, and the third is strong investment and financing capacity.

Risk

1) the production and sales of new energy vehicles are lower than expected; 2) the new supply is higher than expected.