JIANGSU GUOTAI INTERNATIONAL(002091)：1H22 RESULTS IN LINE SALES OF ELECTROLYTE TO GROW RAPIDLY

　　1H22 results in line with our forecast
　　Jiangsu Guotai announced 1H22 results: Revenue reached Rmb21.38bn (+46.2% YoY and -13.7% QoQ) and attributable net profit increased to Rm931mn or Rmb0.57/sh (+151.1% YoY and +7.5% QoQ). The results were in line with our forecast, mainly due to a sharp YoY increase in the sales of electrolytes for lithium-ion batteries (LiB) and the stable growth of the trade business in China and overseas.
　　In 2Q22, revenue reached Rmb11.46bn (+37.1% YoY and +15.5% QoQ) and attributable net profit increased to Rm496mn or Rmb0.3/sh (+142.5% YoY and +14.2% QoQ).
　　Trends to watch
　　Ruitai New Energy Materials listed on ChiNext; focus on LiB electrolyte business. Data from iccsino.com.cn shows major electrolyte manufacturers’ scheduled production increased by 16.9% MoM in August. With the easing of the COVID-19 impact, we expect the growth potential of alternative-fuel vehicle (AFV) sales to be unleashed, and we are optimistic about the full-year demand for electrolytes in 2022. According to the firm’s announcement, the sales volume for battery materials in 1H22 neared 39,000t, and we calculate that earnings per tonne was about Rmb12,000/t. We think the firm’s earnings from electrolytes is likely to stabilize with the prices of hexafluorophosphate and other raw materials bottoming out. We expect the firm’s earnings to grow continuously amid rising sales volume of electrolytes. The firm’s production capacity of electrolytes was 111,000t/yr in 1H22, and its planned and under-construction capacity is about 893,500t/yr. For additives, the firm plans to build a 4,000t/year LiB and supercapacitor electrolyte new material project and a 2,100t/yr LiB material project. For electrolytes, the firm plans to work with Tonze Electric on a 30,000t/year lithium hexafluorophosphate project. After these projects reach designated capacity, the firm's production capacity will likely grow rapidly, with its businesses likely to become more integrated. We expect the sales volume and profit of its electrolyte business to improve in the future.
　　Global supply chain strategy to ensure long-term growth. The firm’s main markets for textiles and apparel include the US and EU. With the Regional Comprehensive Economic Partnership Agreement (RCEP) coming into force and the easing of COVID-19 containment measures overseas, demand for apparel in major overseas markets continued to recover in 1H22. China’s export of textiles and garments rose 11.7% YoY to US$156.49bn in 1H22, and the company’s revenue from textiles and apparel grew 40.60% YoY to Rmb17.97bn. In addition, the firm adjusted its strategy. It has raised Rmb4.56bn from a convertible bond offering to invest in construction, including a textile production project in Myanmar, as part of its continuous efforts to build production bases in Myanmar, Vietnam, and other key countries along the “Belt and Road Initiative” route. In this way, the firm may shift its focus from supply chain integration in China to the integration of its global supply chain. We are upbeat on the long-term growth of the firm’s trade business.
　　Financials and valuation
　　We maintain our 2022 and 2023 earnings forecasts. The stock is trading at 9.1x 2022 and 7.7x 2023 P/E. We maintain OUTPERFORM and our TP of Rmb12.00 (11.1x 2022 P/E and 9.3x 2023 P/E), offering 23.5% upside.
　　Risks
　　Intensifying competition; disappointing AFV sales and/or progress of projects.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。