This is a listed enterprise with the world's largest mineral exploration site, and the lithium mine will account for 38% of the global lithium production in 2021.

In the third quarter of 2022, the company's net profit rate on sales was 79%, ranking first in the A-share lithium concept sector. This shows that as long as the enterprise sells lithium ore of 100 yuan, it can earn a net profit of 79 yuan.

In the same period, the company's P/E ratio was only 8 times. This means that if the management distributes the net profits earned from lithium mining to shareholders every year, you can buy 10000 yuan of shares of the company and earn 10000 yuan of dividends in eight years.

(Data map)

In 2021, the annual net profit of the enterprise will be 2.079 billion yuan, an increase of 213% over 2020. By 2022, the company will have achieved an astonishing performance of 15.981 billion yuan in only three quarters.

This not only enabled the growth of the company's net profit this year to come true ahead of schedule, but also broke the record of the company's performance. The company has made a qualitative leap in this year.

At present, the stock of this company has started to rise in a large amount recently after a full correction of 39%.

(At the end of the article, the translator will tell you the name of the company and the stock code. Please understand the basic situation of the company objectively and honestly before revealing the final answer.)

Main business and core competitiveness

In the company's financial report, the translation officer learned that the company's main business is the production, processing and sales of lithium minerals and lithium chemical products.

The company's revenue from lithium compounds and derivatives accounted for 69%, and the revenue from lithium mines accounted for 31%.

In the financial report of the enterprise, the translation officer also found some data about the development of the new energy industry, as follows:

At the beginning of 2022, the prices of lithium carbonate and lithium hydroxide continued the upward trend since 2021, but the price of lithium compounds slowed down in April and May 2022 due to the repeated epidemic and Russia Ukraine conflict and other external factors.

According to the statistics of Wood Mackenzie, the lithium demand of rechargeable battery industry in 2021 will increase by 57% compared with that in 2020.

The above data are all derived from the company's financial report, which also indicates that the business of the enterprise is in the wind of the industry.

In the company's shareholder information, the translator also learned that among the top ten circulating shareholders of the enterprise, they are all institutional investors, and there is no natural person.

And the top ten circulating shareholders held 45.96% of the outstanding shares. This not only shows the recognition of many institutions to the company, but also shows that the chips of the enterprise are concentrated.

The above is an introduction to the basic situation of the company. Now let's analyze the net profit performance of the company.

Performance

The following contents and financial data are derived from the third quarter report of the company in 2022, without any personal views.

In the third quarter of 2021, the company's performance is only 530 million yuan. By the third quarter of 2022, the company's net profit will reach 15.981 billion yuan, a substantial increase of 2916% year on year.

The company's current performance ranks second among the 43 listed enterprises in the A-share lithium concept sector. This ranking is very high, indicating that its scale is relatively large.

After analyzing the company's performance, let's take a look at the current cash flow of the enterprise. Net cash flow from operating activities is an indicator to measure a company's cash receipts and payments, also known as the touchstone of net profit.

In the third quarter of 2022, the net profit of this enterprise is 15.981 billion yuan. However, in the same period, the net cash actually earned by the company from operating activities was 11.735 billion yuan, a significant increase of 750% year on year.

This means that if you open the profit statement of the company at this time, you will find that in the first three quarters of this year, the company did make a net profit of more than 15 billion yuan.

If you open the bank account of this enterprise at this time, you will find that in 2022, the cash received by the company from operating activities minus the cash paid for operating activities will leave a net cash of 11.735 billion yuan.

The reason for this is that in the buyer's market, enterprises always deliver goods before collecting money, which results in accounting period and accounts receivable.

Therefore, it is a normal phenomenon that the net profit is higher than the net cash flow, because the difference between the two is the payment for goods that has not yet been received, which will be transferred to the company's account in the coming quarter.

In the third quarter of 2022, the net cash flow of this enterprise increased nearly 8 times year on year. This shows that compared with the same period last year, the cash flow of the company is very abundant, and the cash in its account has also become more, which is very beneficial to the production and operation of the company.

From the above analysis, we know that in 2022, this enterprise will have a large scale, and its current cash flow is also very abundant.

Reasons for net profit growth

In the most important part of this article, the translation officer will use DuPont theory to analyze the reasons for the company's performance growth. I hope you can read it carefully.

After analyzing the main financial data, the translation officer found that in the third quarter of 2022, the main reason for the growth of the company's net profit was the expansion of the profit space of lithium mine.

The profit margin of the product should be measured by the company's gross profit margin.

In the third quarter of 2021, when the enterprise sells lithium ore of 100 yuan, it can only earn a gross profit of 53.28 yuan, with a gross profit margin of 53.28%.

In the third quarter of 2022, the company also sold 100 yuan of lithium ore, but could earn 85.53 yuan of gross profit. The gross profit rate of sales reached 85.53%, up 60% year on year.

The current gross profit margin of this enterprise, that is, the profit margin of lithium mine, also ranks second among the 43 listed companies in the A-share lithium mine concept sector. This ranking is also very high, indicating that its ability to make money is relatively strong.

Through the above analysis, we know that in 2022, due to the new energy industry, the profit space of the enterprise's lithium mine will be expanded, which will lead to the growth of the company's performance in the third quarter.

deficiencies

The above analysis of the company's many advantages, let's find fault and see what problems and flaws the company currently has, which is worth our attention.

After analyzing the main financial data, the translation officer found that in the third quarter of this year, the biggest problem of the enterprise was the reduction of financial leverage.

Financial leverage is a measure of the use of liabilities by a company's management, usually expressed by the equity multiplier. However, the translation officer believes that the asset liability ratio will be more vivid.

In the third quarter of 2021, 60.59 yuan of the enterprise's 100 yuan assets were borrowed, and the asset liability ratio was 60.59%. By the third quarter of 2022, the company's asset liability ratio will fall to 25.53%, down 58% year on year.

The current asset liability ratio, or financial leverage, of this enterprise ranks sixth among the 43 listed companies in the A-share lithium concept sector. This ranking is very high, indicating that the asset liability ratio of the enterprise is relatively low.

Some people think that the reduction of financial leverage can not only reduce the debt ratio of a company, but also reduce the financial expenses of the enterprise and reduce its operating costs, which is very beneficial to the production and operation of the company.

However, the reduction of financial leverage and debt ratio also made the enterprise borrow less money from the bank, which made it impossible to increase net profit by expanding production capacity.

Therefore, the reduction of financial leverage not only reduces the efficiency of the company's capital use, but also weakens its ability to make money, which is not conducive to the growth of the company's future net profit.

In the third quarter of this year, the company's performance showed a substantial increase. In this case, the management chose to reduce the financial leverage, which weakened the company's ability to make money. The translation officer thought this was inappropriate.

If the fundamentals of a listed company are divided into five levels from high to low, namely, A, B, C, D and E, the translation officer personally believes that the company can maintain the level of B level.

This enterprise is Tianqi Lithium Industry Co., Ltd., stock code: 00246.

Please note that the stocks of companies with good fundamentals will not necessarily rise. But for those stocks that can continue to soar, the company's fundamentals must be excellent.

This article neither recommends Tianqi Lithium, nor says how good Tianqi Lithium is, but refines and translates its financial report.