Maintain an “Overweight” rating. Tianqi Lithium announced that it is expected to achieve net profit of 6.62 to 8.95 billion yuan in 2023 (-62.90% ~ -72.56% YoY), of which net profit for the fourth quarter is expected to be 1.48 to 850 million yuan (-118.16% ~ -89.55% YoY, -189.80% ~ -48.33%).
Results fell short of expectations. Based on judging the medium- to long-term supply and demand pattern of the lithium industry, the company's EPS for 2023-2025 was lowered to 4.63/4.19/4.36 yuan, respectively (originally 8.98/7.51/8.71 yuan). Referring to the industry average and the valuation premium brought about by the company's status as an industry leader and falling costs, the company was given a valuation of 15 x PE in 2024, the target price was lowered to 62.85 yuan, and the “gain” rating was maintained.
The reason for the sharp decline in performance: lithium prices continued to decline, and the demand side was not strong during the peak season. According to SMM, the average price of battery-grade lithium carbonate in the fourth quarter was 140,000 yuan/ton (-42% month-on-month). The market's downward revision of the rate and trend of lithium prices is the main reason for lowering profit forecasts and target prices.
The company's lithium ore pricing lags behind the market, and the cost of raw materials is high in stages. The pricing of Greenlithium ore lags behind the market price, and the company's raw material costs are high. IGO announcement discloses data:
In the fourth quarter of 2023, Greenmanganese lithium ore sold for $2,984/ton. According to the FastMarkets website, the average price of lithium ore in Australia in the fourth quarter was 1,703 US dollars/ton (CIF, 6%).
The impact of this premium continued to be reflected in 2023, and high phased raw material costs had an impact on quarterly profits.
The 2024 pricing adjustments are more timely, and the company's performance is expected to recover marginally. According to IGO's latest announcement, from January 1, 2024, the lithium concentrate pricing cycle was changed to M-1 (based on the average price of the previous month), mainly based on the average price values of the four websites, and a 5% discount will be given.
Risk warning. Sales of new energy vehicles fell short of expectations.