Description of the event

Tianci Materials released its 2024 quarterly report. 2024Q1 achieved revenue of 2,463 billion yuan, a year-on-year decrease of 42.91%. Net profit attributable to mother was 114 million yuan, a year-on-year decrease of 83.54%. Non-net profit after deduction was 101 million yuan, a year-on-year decrease of 85.32%.

Incident comments

On the revenue side, the year-on-year increase in Q1 electrolyte shipments is expected to increase further. If 6F and LIFSI export sales increase further, the overall shipment growth rate is higher than the industry's growth rate. On the cost side, the company's Q1 sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 0.5%, 7.5%, 5.6%, and 1.8%, respectively. They remained flat, up 3.8 pct, 1.4 pct, and 0.3 pct, respectively. Among them, the sharp increase in the management expense ratio was mainly affected by bonus accrual. On the profit side, net profit per ton declined month-on-month. Among them, the profit per ton of electrolyte converted from the export of lithium salt was higher than the profit per unit of a single electrolyte, and there were losses in the electrolyte processing process. Shipments from cathode businesses such as iron phosphate increased slightly month-on-month and doubled year-on-year. Affected by price adjustments and low operating rates, there were still losses overall. It is expected that Q2 will still be under pressure due to the industry's supply and demand pattern; traditional daily chemicals and other businesses contribute profits, and the resource recycling business is in balance.

Looking ahead, with the exception of the leading companies in the 6F industry, all are in a state of loss. The expansion of effective production capacity in the industry is slowing down, and high-cost companies are expected to clear out. As production capacity utilization increases and the proportion of lithium salt exports increases, the company is expected to achieve an increase in market share and marginal improvement in operating profits. Furthermore, it is expected that losses will be reduced as Zhengji's business utilization rate increases and production capacity is released, surpluses will be achieved in the second half of the year, and integrated advantages will gradually be exploited. Keep recommending.

Risk warning

1. The risk of a downturn in industry sentiment;

2. The risk that profitability falls short of expectations due to increased competition in the industry.