Introduction to this report:

Thanks to a significant increase in cathode material sales, product structure and scale effects supporting profitability, the company's profit for the first half of 2024 declined by only a single digit year on year. The product development side will continue to contribute to long-term performance growth.

Key points of investment:

Maintain an “Overweight” rating. The company's second-quarter results improved month-on-month. Considering the increase in new customers of the company's ternary cathode and the recovery in downstream demand for lithium cobalate, the company maintained its 2024-2026 EPS at 1.36 yuan, 1.80 yuan, and 2.27 yuan, and maintained the target price of 44.09 yuan.

The performance was in line with expectations. The company achieved revenue of 6.3 billion yuan in the first half of 2024, a year-on-year decrease of 22.4%; net profit to mother was 0.239 billion yuan, a year-on-year decrease of 6.1%; net profit not attributable to mother was 0.22 billion yuan, a year-on-year decrease of 3.2%. Among them, revenue for the second quarter was 3.001 billion yuan, down 33.8% year on year; net profit to mother was 0.128 billion yuan, down 8.1% year on year, up 14.8% month on month; net profit without return to mother was 0.117 billion yuan, down 9% year on year, up 14.1% month on month; and net profit for the second quarter showed a month-on-month improvement.

Cathode materials are growing faster than the industry. The company achieved sales volume of 0.0448 million tons of cathode materials in the first half of 2024, an increase of 57% over the previous year. Among them, ternary materials sold 0.0263 million tons, up 108.59% year on year, mainly due to the smooth introduction of the company's ternary cathode customers; sales of lithium cobalate were 0.0184 million tons, up 29.98% year on year, mainly due to the recovery of 3C consumer electronics and a further increase in leading market share. It is estimated that in the first half of 2024, the company deducted 0.0049 million yuan for a single ton of cathode materials, a year-on-year decrease of 38.75%. This is mainly due to the rapid expansion of production capacity in the new energy battery materials industry affecting material sales prices and profit margins. Meanwhile, hydrogen storage alloys achieved sales volume of 1859.99 tons in the first half of 2024, an increase of 7.53% over the previous year, and continued to maintain the leading position in the industry.

There are plenty of product development bureaus. As the world's leading lithium cobalate company, in response to the demand for high energy density for AI functions, the company is actively developing next-generation high-performance cathode material products. It is expected that energy density and profitability will increase significantly, and it is expected that they will be used in terminals in the second half of the year. At the same time, the company is progressing smoothly in research and development of new products such as ternary materials and solid state hydrogen storage in low-altitude fields such as liquid phase lithium iron phosphate, sodium electric cathode materials, lithium supplements, drones, etc., and is expected to occupy more market space in the future.

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