The market has finally ushered in a liquidation.
Less than half an hour after yesterday’s session, even the lithium battery, which has always been the most resistant to decline, finally could not bear the pressure of adjustment and began to make up for the decline, and also further collapsed the ChiNext.
However, when the panic spread of the collective drop limit of lithium batteries yesterday, there were also stocks in the sector like Rongjie shares that rose to the limit in the morning and were brought down alive at the end, and took the lead in rebounding today, showing a certain resistance to the fall.
(Rongjie shares since October last year, data source: choice)
In addition, if you calculate from the lowest point of 17.8 since October last year, as of today’s close of 130, Rongjie has increased 6 times in less than nine months, which is not without explosion.
The main business of Rongjie Co., Ltd. is lithium mining and dressing industry, lithium salt and deep processing, lithium battery equipment. The main products are lithium concentrate, battery-grade lithium carbonate, battery-grade lithium hydroxide, fully automatic machine, automatic liquid injection machine, mobile storage baking line, automatic packaging machine.
Among them, lithium concentrate and lithium salt processing account for more than 70% of the revenue is the absolute dominant business, and the remaining 30% of the revenue contribution comes from lithium battery equipment.
In other words, Rongjie Co., Ltd.’s lithium mine resources and equipment stocks in the upstream of lithium batteries are fully benefiting from the development of new energy.
As a result, since October last year, Rongjie has ushered in the take-off point of the stock price.
At the beginning of 2018, with the oversupply of lithium resources, the promotion of high nickel ternary was not as expected, and lithium prices began to decline from the high point of the cycle. After experiencing the continuous clearance of excess lithium resource capacity in the first half of 2019 and 2020, lithium prices gradually came to the bottom of the cycle, and the lithium carbonate price index fell all the way from the highest 400 to the lowest point around October last year of 100.
(Lithium carbonate price index, data source: choice)
Entering the second half of 2020, as the consumption of new energy vehicles takes the lead in recovery, the biggest demand logic driven, coupled with the decline in lithium prices, the expansion intention of global lithium mining is not strong. Coupled with the impact of the new crown epidemic, lithium producers have misjudged the prospects of new energy vehicles, resulting in a shortage of lithium raw material supply.
In the case of increasing demand and industry supply lagging, lithium prices have gradually ushered in an upward turning point in the cycle.
At the same time, the lithium mining sector in the secondary market is about to move, and lithium batteries have walked out of a wave of sharp trends since October last year. That is, since that time, Rongjie shares, which are mainly engaged in lithium resources, have also been targeted by funds since then.
However, when it was hyped last year, Rongjie shares were still ST Rongjie at that time.
Due to the decline in lithium prices in previous years, Rongjie suffered losses for two consecutive years in 2018-2019 and was hatted. But from Q2 2020, with the bottom of the cycle coming, lithium prices fell without falling, and ST Rongjie began to make a profit.
(Rongjie Co., Ltd. 2019-2021Q1 performance, data source: choice)
Obviously, the logic of last year’s capital hype is based on the reversal of performance brought about by the rise in lithium prices and the expectation of removing the cap.
Since July this year, the surge in Rongjie shares is inseparable from the strong sales of new energy vehicles, driving the rising price of lithium, which has improved the prosperity of the industry.
In the first half of this year, the production and sales of domestic new energy vehicles exceeded 1.2 million units, an increase of 2 times year-on-year, and continued to maintain a high incremental trend. At the same time, on July 20, the domestic battery-grade lithium carbonate quotation rose by 500 yuan / ton to 88,000 yuan / ton, and the price of lithium carbonate has risen again since April.
(New energy vehicle sales in the first half of 2021, data source: choice)
Moreover, the growth of lithium supply this year and next is mainly from the lithium extraction capacity of salt lakes in South America, including the expansion projects of Albemarle, SQM and Ganfeng Lithium, but the above production capacity will not form an effective supply until the second half of 2022, and the tight lithium supply situation cannot be alleviated for a long time, and there is no factor to suppress lithium prices at present.
In addition, in this upward cycle of the lithium industry, Rongjie is also actively expanding production. The 2.5 million tons/year lithium mine select project of Rongjie Lithium Industry, a wholly-owned subsidiary, has completed the project filing, and the 20,000 tons/year lithium salt project of the first phase of the lithium salt plant of Chengdu Rongjie Lithium Plant, a shareholding enterprise, has completed the construction of civil works.
The expansion of the above projects corresponds to the performance that Rongjie may increase in the future.
Finally, back to the current entire lithium battery, in the current market sharp decline and the background of popularity damage, the sector is difficult to adjust in place in a day or two. Therefore, at this time, even for a resilient target like Rongjie shares, forcibly chasing higher is obviously an operation that risks outweigh benefits.
(Historical PB distribution of Rongjie shares, data source: choice)
Rongjie is currently being speculated to 1274 times PE, which is already in a distorted position from the past loss performance. So look at his 59 times PB from another angle, which is in an absolutely high position in history.
Therefore, at the moment when the entire lithium battery has been speculated for a year and the valuation is also on the high side, with the comprehensive adjustment of the sector, it is a small probability event for Rongjie shares to continue to rise, and it is a high probability event to follow the sector to make up for the decline. Even if you’re a gambler, you know how to choose.
(Lithium battery index historical PE distribution, data source: Wind)
Remember, risk goes up, chances don’t come out. You may wish to wait patiently for the entire lithium battery sector to adjust in place, and then look for a less expensive and more logical hardcore faucet is safer.
This article originated from Gelonghui
