HUAYOU COBALT(603799) 高盛·2025-04-27 03:56Investment Rating - The report maintains a "Sell" rating for Huayou Cobalt with a revised target price of Rmb27.00, indicating a downside of 20.2% from the current price of Rmb33.82 [1][2]. Core Insights - Huayou Cobalt reported a net profit of Rmb4.2 billion for 2024, reflecting a 24% year-over-year increase, primarily driven by higher profits from nickel and lithium [1][20]. - The company is facing challenges in the ternary battery materials market, with market share declining to below 20% in Q1 2025 from 27% in 2024 and 32% in 2023, leading to lower shipments and margins [2][31]. - The earnings outlook remains cautious due to depressed prices for lithium, nickel, and cobalt, which are expected to cap earnings improvements [2][31]. Financial Summary - Revenue for 2024 is estimated at Rmb60.5 billion, down 8% from 2023, with a gross profit of Rmb10.1 billion, up 12% year-over-year [28]. - The earnings per share (EPS) for 2024 is reported at Rmb2.50, a 22% increase from the previous year [28]. - The company declared a cash dividend of Rmb0.50 per share, with a payout ratio of 23%, significantly lower than the 69% in 2023 [1][28]. Earnings Estimates - Recurring earnings estimates for 2025-2026 have been revised upward by 44-55% due to higher refined nickel sales volume and lower costs for lithium [2][31]. - The projected EPS for 2025 is Rmb1.89, down from the previous estimate of Rmb1.79, reflecting ongoing market challenges [2][28]. Market Dynamics - The ternary battery materials market is expected to continue facing pressure, with increased competition and declining unit profits anticipated [31]. - The report highlights that Huayou's earnings are likely to remain depressed in 2025 due to weak prices for nickel, cobalt, and lithium [31]. Valuation Analysis - A bottom-of-the-cycle valuation analysis suggests a theoretical valuation range of Rmb7.8 to Rmb14.1 per share for Huayou, compared to the current share price of Rmb33.8 [2][31]. - The report's sum-of-the-parts (SOTP) valuation methodology indicates a valuation of Rmb22.7 per share for the battery material business [26][32].