Core views:

Q1 Net profit to mother - 140 million yuan, and the extent of loss improved month-on-month. According to the first quarterly report, Q1 achieved revenue of 1.21 billion yuan, a year-on-year decrease of 56% and 8%; achieved gross profit of 50 million yuan, with a month-on-month loss (23Q4 -50 billion yuan) as a profit; realized net profit to mother of -140 million yuan, a decrease of 131% and a 63% increase; realized net profit without return to mother of 160 million yuan, a decrease of 150% and a decrease of 55%; net cash flow from operating activities was 450 million yuan, a decrease of 23% and a decrease of 22%. By the end of the first quarter, the company's balance ratio was 41.19%, up 5.16 PCT from the beginning of the year. The degree of loss in performance improved month-on-month, mainly due to stabilizing lithium prices, easing of inversion costs, and correction of gross profit.

Q1 Lithium prices continue to fall, and the amplitude has narrowed somewhat. According to Asia Metal Network, the average arrival price of Q1 lithium concentrate SC6 was 1,058 US dollars/ton, down 81% from the same period, and 39% lower. According to Wind, the average prices of lithium carbonate (99.5%) and lithium hydroxide (56.5%) in Q1 were 102,000 yuan/ton and 89,000 yuan/ton, respectively, down 75% and 80% year on year, respectively, and 28% and 31% month-on-month respectively. Prices of lithium carbonate, lithium hydroxide, and lithium concentrate fluctuated more smoothly in Q1. The amplitudes (highest price in the range - lowest price) were 17,000 yuan/ton, 15,000 yuan/ton, and 230 US dollars/ton, respectively. 23Q4 were 77,000 yuan/ton, 74,000 yuan/ton, and 1,070 US dollars/ton, respectively.

With lithium prices stabilizing, the company's profit is expected to continue to improve. The company's lithium salt production capacity is higher than the mineral lithium production capacity. When lithium prices fluctuate greatly, the price change of raw lithium concentrate lags behind that of lithium salt, causing cost inversion at the smelting side. As lithium prices stabilize, the company's processing profits are expected to continue to improve.

Profit forecasting and investment advice. The company's 24-26 EPS is expected to be 1.05/1.15/1.21 yuan/share, respectively, and the PE corresponding to the latest closing price is 17.0/15.4/14.6 times, respectively. The stabilization of lithium prices is expected to improve the company's performance. At the same time, the company has 48.06% of the shares in Asia's largest hard rock monomer lithium velvet mine. The mine is undergoing procedures related to exploration and mining, and the industry is at the bottom. We think it is reasonable to give the company a 24-year PE valuation of 20 times. The corresponding company's reasonable value is 20.91 yuan/share, maintaining the company's “buy” rating.

Risk warning. Risk of low demand and rising costs; risk of project operation; risk of exchange rate fluctuations.