1H24 revenue/net profit to mother declined year-on-year

The company 1H24 achieved operating income of 6.3 billion yuan, a year-on-year ratio of -22.43%, and realized net profit of 0.239 billion yuan, or -6.12% year-on-year; net profit of non-return to mother was 0.22 billion yuan, or -3.24% year-on-year. Considering the intense competition in the industry, we revised the company's gross margin assumption. The estimated net profit forecast value for 24-26 is 0.674/0.817/1.063 billion yuan (previous value was 0.952/1.112/1.228 billion yuan). Comparatively, the company's 24-year Wind unanimously anticipated an average PE value of 29x, giving the company a 24-year target PE of 29x, corresponding to a target price of 46.43 yuan (previous value 38.47 yuan), maintaining a “buy” rating.

1H24 Profitability is temporarily under pressure

The company shipped 0.0448 million tons of 1H24 cathode materials, +56.93% year over year, of which 0.0263 million tons were three yuan, +108.59% year over year, mainly due to the positive demand for medium nickel high voltage products. The company actively developed customers and sales resumed growth; 0.0184 million tons of lithium cobalate, +29.98% year over year, consumer electronics industry demand picked up, and the company's leading position in the lithium cobalate industry was stable. The gross profit per ton of 1H24's products was 0.0134 million/ton, or -38.54% year-on-year, mainly due to increased industry competition, reduced processing costs, and fluctuating raw material prices. The cost ratio during the 1H24 period was +0.81 pct to 5.30% year over year, mainly due to the year-on-year decline in revenue affecting cost dilution.

The share repurchase is progressing smoothly, demonstrating the company's confidence in development

The company announced on February 7, 2024 that it will use its own funds to repurchase the company's shares through centralized bidding. The total capital for the repurchase of shares is not less than RMB 30 million (inclusive) and not more than RMB 50 million (inclusive), and the repurchase price shall not exceed RMB 50.30 per share (inclusive). As of July 31, 2024, the company has repurchased a total of 1,049,834 shares, accounting for 0.25% of the company's total share capital, and the cumulative payment amount is RMB 35.6838 million. This buyback will further implement the company's “improve quality, increase efficiency, and focus on return” actions and send a positive signal of confidence in future development.

A comprehensive strategic partnership agreement was signed with ORANO SA to promote the overseas market layout company and the French company ORANO SA signed the “Agreement to Establish a Comprehensive Strategic Partnership in the Battery Industry” on May 6. Following the signing of a joint venture agreement between the two companies in May, the agreement will continue to promote the partnership between the two sides for new energy battery cathode materials projects. On August 2, the company announced that the joint venture subsidiary will build a cathode material precursor project with an annual output of 40,000 tons, with a total investment of 210 million euros, of which the company will invest 102.9 million euros according to 49% of the shares held in the joint venture. The two sides will continue to strengthen the R&D capacity of the CAM plant (three-yuan joint venture plant) and the PCAM plant (precursor joint venture factory), and cooperate to promote key carbon neutrality goals such as battery recycling and raw material security. Cooperation is conducive to speeding up the company's development progress in the European market and ensuring the company's steady and far-reaching expansion in overseas markets.

Risk warning: The company's production capacity expansion fell short of expectations; industry competition intensified; upstream raw material prices fluctuated beyond expectations.