Incidents. On August 3, 2024, the company released its 2024 semi-annual report. Operating revenue was 6.888 billion yuan, down 46.58% year on year; net profit to mother was 0.01 billion yuan, down 97.29% year on year; net profit after deduction was -0.004 billion yuan, down 101.17% year on year.

Q2 There has been a significant improvement in business, and the future can be expected. In terms of shipment volume, 24H1 sold 0.0549 million tons of cathode materials, with a total sales volume of 0.0527 million tons of high-nickel products, +16.82% year over year, 39% domestic market share, +5pcts year over year, with a global market share of 20%, ranking first in the industry, which strongly confirms the company's advantage in the high nickel field. In terms of profit, the company's net profit for the first half of the year was 0.023 billion yuan, including more than 0.09 billion yuan invested in strategic businesses such as precursors, lithium manganese, and sodium electricity. After adding up, the three-yuan cathode profit was 0.12 billion yuan, corresponding to a net profit of nearly 2,200 yuan per ton. Looking further, 24H1's net profit was 0.01 billion yuan, of which Q2 was about 0.048 billion yuan, +227.60% month-on-month. The significant improvement was mainly due to 1) accurate product and customer card positions, the proportion of overseas customers continued to increase, and large-scale shipments of 0.012 million tons of ultra-high nickel 9 series products, with better pricing and profit levels; 2) strengthening supply chain management to respond positively to the decline in lithium carbonate and nickel prices; 3) cost reduction through refined internal management. Outlook: The company has been deeply involved in high nickel for many years, and has accumulated deep technology. On the one hand, it has continuously enriched its product matrix to meet customer needs, and on the other hand, it has firmly implemented a global strategy. The Korean factory has entered a harvest period and is committed to growing into a global ternary cathode leader.

Globalization is gradually bearing fruit. The global layout is being promoted in all directions, with 24H1 overseas customers accounting for 17% of sales, +16 pcts compared to the previous year. In terms of production capacity, the Korean base has now built a high nickel cathode production capacity of 0.02 million tons/year, and production continues to increase steadily; the second phase of construction of 0.04 million tons/year material production capacity is progressing rapidly. On the customer side, agreements or framework agreements have been signed with a number of world-renowned battery companies, and shipments to European and American customers have also increased significantly. In addition, the site selection and verification work for the entire North American region has basically been completed, and the European factory layout has also been completed, and construction work will officially commence later.

The new product is progressing smoothly. With years of technology accumulation and industry insight, the company has forwardly laid out new products and made significant progress: 1) Lithium manganese: 24H1 shipments reached total shipments for the full year of 2023, +166% over the same period last year.

Solid-liquid integrated products were verified in the first half of the year, and full mass production is expected in the second half of the year. 2) Sodium electrocathode: While maintaining stable mass production of layered materials, polyanionic products have been officially mass-produced and are receiving demand from well-known customers to expand production. 3) Solid state battery cathode: We have established cooperative relationships with more than 40 domestic and foreign battery and vehicle companies, such as Ningde Times and Weilan New Energy. Among them, batteries equipped with semi-solid materials have been used in 1000-kilometer ultra-long battery life models for end customers. All solid-state materials have been fully recognized by leading customers in the industry, and shipments have grown steadily.

Investment advice: We expect the company to achieve revenue of 16.091/18.971/22.427 billion yuan in 2024-2026, or -29.0%/+17.9%/+18.2%; net profit to mother of 0.193/0.494/0.672 billion yuan, respectively, or -66.8%/+155.7%/+36.2%. The corresponding PE closing price on August 2 was 56x/22x/16x. As the company actively embraces overseas, the level of profit is expected to increase and maintain a “recommended” rating.

Risk warning: NEV sales fall short of expectations, industry competition intensifies, new technology development falls short of expectations, overseas geopolitical risks, etc.