In-line 1H18 results; awaiting product mix improvementPDF

研报日期：2018-09-30

【当升科技(300073)、股吧】(300073)

1H18 results within expectation but a less optimistic margin outlook

Easpring's 1H18 results declined by 22% Y oY to RMB113m, in-line with itspreviously issued profit alert. Excluding the effect of one-off disposal gain in1H17 and government grants in both reporting periods, the company's recurringincome was RMB106m in 1H18, up 115% Y oY , which increased at the same paceas revenue growth (RMB1.6b, +95% Y oY). We cut our 2018E/2019E earningsforecast by 13%/12% to factor in spot prices YTD and a more conservativemargin outlook for its cathode business, and revise our target price to RMB25.4accordingly. Hold maintained.

High-nickel-content cathode performance remains the key factor to watch

The company's cathode business recorded a GPM of 12.2% in 1H18, down2.3ppt Y oY , mainly on account of elevated raw material prices. As cathodeproducers pass through the raw material costs, we believe the key driver tomonitor will be the product-mix change and the performance of Easpring's highnickel-content cathodes. We factor in the spot prices and cathode margin YTDand revise down our margin assumptions for the company's cathode business,as the downstream battery clients' bargaining power surpasses componentmanufacturers. We expect Easpring's earnings growth to be driven by the highnickel-content cathode contribution, with volume expanded by five-fold from lessthan 5kt in 2017 to 24kt in 2020E.

Revising target price to RMB25.4 and maintaining Hold; risks

We adjust downward our 2018E/2019E profit forecast by 13%/12%, mainlyto reflect lower margin assumptions for its cathode business, as the downstreambattery industry exhibits a higher market concentration. We maintain our target P/E multiple at 25x FY19E EPS, which is in-line with the industry average. We reviseour TP to RMB25.4 ……[德意志银行]
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