Key points of investment

The company released the 24H1 performance forecast, which exceeded market expectations. Net profit of 24H1 was 1.5-1.8 billion yuan, down 14%-28%, after deducting non-net profit of 1.57-1.87 billion yuan, -15% -+2% year-on-year. Among them, 24Q2 net profit was 0.98-1.28 billion yuan, up 87% to 145% year-on-year, and the median forecast value was 1.13 billion yuan, +6%/+116% month-on-month; 24Q2 deducted non-net profit of 1-1.3 billion yuan, up 19%-54% and 76% to 129%. The performance exceeded market expectations.

Shipments of the precursor Q2 increased significantly month-on-month, and profits remained stable. We expect the company to ship 0.055 million tons+ of 24H1 precursors, an increase of about 5%. Of these, Q2 shipments are 0.03 million tons+, and the increase is significant. We expect to ship 0.17-0.18 million tons for the whole year, an increase of 30% +; on the profit side, the company's self-supply ratio of nickel sulfate is high, and the overall profit can maintain the industry average. We expect the company to ship 0.04-0.045 million tons of 24H1 cathodes, a year-on-year decrease of about 5%. Overall, the company can maintain marginal profits. Furthermore, the company's assets such as Leyou and Puhua can be gradually released, contributing to part of the investment income.

Q2 The unit profit of rising nickel prices increased, and the Huafei project contributed significantly to production. On the nickel smelting side, we expect the company to ship about 0.08-0.09 million gold tons of nickel intermediates in the first half of the year. Of these, the Huafei Project will produce 0.12 million tons of MHP in March, and nickel smelting shipments are expected to be around 0.24 million gold tons (equity 0.13 million gold ton+). Due to the high nickel price, the company shipped 0.04 million tons+ of 24H1 electric nickel, of which Q2 shipped 0.02 million tons+. Based on the nickel price of 0.017 million US dollars, we estimate a net profit of 0.004 million+ per ton of Q2 electric nickel, contributing 0.6-0.7 billion yuan in profit. The current decline in nickel prices has stabilized. Considering the tightening of approval of nickel ore quotas in Indonesia, and the reduction in nickel smelting production capacity in other regions, the overall nickel price center is moving upward. Based on 0.016-0.017 million US dollars, we expect nickel smelting to contribute about 2.5-3 billion yuan to net profit throughout the year.

The profit elasticity of the copper business is remarkable, and the cost reduction of lithium mine projects contributes to profits. We expect to ship about 0.025 million tons of copper products in Q2, of which our own mine is expected to be around 0.005 million tons, making a profit of 0.003 million US dollar+ per ton, adding up the pure processing portion to a total profit of 0.2 billion yuan+. We expect to ship 0.1 million tons overall in 24 years, of which our own mines are expected to be about 0.02 million tons, and the combined processing portion of profit will contribute about 0.5-1 billion yuan in total profit; we expect Q2 Cobalt products are shipped 0.01 million tons+, and private mines can achieve partial profits. The total cost of the Arcadia lithium project was reduced to 0.09-0.095 million US dollars (tax included). We expect to ship about 0.018 million tons of H1 lithium carbonate, which can maintain a marginal profit. We expect to ship 0.025-0.03 million tons throughout the year.

Profit forecast and investment rating: We maintain the company's profit forecast for 2024-2026. We expect the company's net profit to be 3.5/4.6/5.7 billion yuan in 2024-2026, an increase of 5%/30%/25%, corresponding to PE of 10x/8x/6x. Considering the company's significant integration advantages, we will give the company 15x PE for 24 years, with a target price of 31.2 yuan to maintain a “buy” rating.

Risk warning: Prices of upstream raw materials have fluctuated greatly, and sales of electric vehicles have fallen short of expectations.