Description of the event

Rongbai Technology released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 3,692 billion yuan, a year-on-year decrease of 55.88%, and attributable net profit of -37 million yuan, a year-on-year decrease of 111.98%, after deducting non-net profit of -38 million yuan, a year-on-year decrease of 112.89%.

Incident comments

2024Q1, the company sold more than 26,000 tons of ternary cathode materials, stable over Q4, 11% of the global market share, and 18% domestic market share, of which sales volume was 11,000 tons in a single month in March. Sales are expected to increase further in Q2, mainly due to the recovery in demand from downstream customers. Overseas customers also achieved breakthroughs in Q1, and shipped a total of 50,000 tons to foreign customers, accounting for 20%; in terms of product structure, the company's ultra-high nickel 9 series products sold 0.65 million tons, and the domestic market share of high-nickel ternary cathode materials was 40%.

In terms of profit, the company's net profit of 3 yuan per ton is under apparent pressure, mainly due to losses such as precursors, lithium manganese, and preliminary preparations for the Korean base. If these effects are excluded, it is estimated that the profit of 3 yuan per ton will achieve positive returns from the perspective of processing costs. In addition, the company accrued asset depreciation of 0.07 billion yuan and credit asset impairment of 08 billion yuan.

In terms of other financial data, the company's 2024Q1 net fixed assets were 6.369 billion yuan, and construction was 1,847 billion yuan, stable compared to 2023Q4, with an inventory balance of 1,555 billion yuan, the same as 2023Q4. In terms of cash flow, the company's net cash flow from 2024Q1 operating activities was 1.01 billion yuan, asset expenses were 450 million yuan, capital expenditure decreased year-on-year, and the company's new production capacity slowed down.

Looking ahead to 2024Q2 and the whole year, the company's Q2 shipments are expected to continue to rise, with a month-on-month increase in April, and Q2 is expected to achieve 35,000 tons+shipment; in terms of profit, the company's three-yuan processing fee declined slightly, but the recovery in operating rate led to stable profits, and losses in precursors, lithium manganese, and the Korean base will narrow. Shipments continued to grow month-on-month in the second half of the year, increasing utilization rates compounded losses narrowing, and profits continued to grow. Furthermore, in terms of production capacity, the company continues to build production capacity at its Korean base, and the European and American market layout is also being actively promoted; new technologies, such as solid-state battery cathodes and electrolytes, are also being developed, and are optimistic about the company's future development and will continue to be recommended.

Risk warning

1. Market competition increases risk;

2. The risk that demand in the power battery industry falls short of expectations.