24H1's net profit to mother was -39.26% YoY, maintaining an increase in holdings rating
Tianhua Xinneng released its semi-annual report. In 2024, H1 achieved revenue of 3.713 billion yuan (yoy -44.09%), net profit to mother of 0.835 billion yuan (yoy -39.26%), deducting non-net profit of 0.523 billion yuan (yoy -55.92%). Among them, Q2 achieved revenue of 1.959 billion yuan (yoy -36.89%, qoq +11.66%) and net profit of 0.333 billion yuan (yoy -32.49%, qoq -33.69%). Based on the fact that the industry is still searching, we expect the company's 2024-2026 EPS to be 1.55, 1.64, and 2.50 yuan respectively (the previous value was 1.56, 1.65, and 2.51 yuan in 2024-2026). BPS was 15.74, 17.07, and 19.24 yuan (previous value: 15.83, 17.17, 19.35 yuan in 2024-2026). Comparable to the company's 24-year Wind, the average PB was 1.14 times, giving the company 1.14 times PE in 24 years, and the target price was 17.94 yuan (previous value 21.4 yuan), maintaining the “gain” rating.
Falling lithium prices are dragging down performance
24H1's lithium battery material products achieved revenue of 3.316 billion yuan, yoy -47.08%, cost 2.722 billion yuan, yoy -37.48%, gross profit margin of 17.91%, yoy-12.59pct. The significant year-on-year decline in revenue was mainly due to a sharp drop in lithium prices. According to Wind, the average price of 24H1 lithium hydroxide was 0.0923 million/ton, a year-on-year decrease of 73.8%, but due to the expansion of the company's production capacity, the revenue decline was less than the decline in lithium prices.
The company's production capacity continues to expand and actively lays out lithium concentrate supply channels
The company's production capacity continues to expand. According to the announcement, Tianyi Lithium's first and second battery-grade lithium hydroxide projects have a mature production capacity of 0.05 million tons per year. Sichuan Tianhua Shidai Lithium Energy's battery-grade lithium hydroxide construction project with an annual output of 0.06 million tons has been completed and successfully put into use. The first phase of Yibin Weineng Lithium's battery-grade lithium hydroxide project with an annual output of 0.025 million tons has been completed and is currently in a small trial phase. Fengxin Era plans to build a battery-grade lithium carbonate smelting capacity project with an annual output of 0.1 million tons. The first phase of the project with an annual output of 0.03 million tons of battery-grade lithium carbonate was basically completed and officially ignited in July 2023. In addition, the company actively lays out lithium concentrate supply channels and has signed long-term procurement and underwriting agreements with upstream lithium concentrate resource manufacturers such as Pilgangoora, AMG, AVZ, and Global Lithium, forming a stable and high-quality raw material supply system.
The short-term downward trend in lithium prices will continue. In the future, we need to pay attention to the extent of supply-side clearance due to oversupply, and 24H1 lithium prices will continue to decline. Recently, some large overseas mines showed signs of production cuts, and Albemarle (Albemarle) of the United States, the world's largest lithium miner, voluntarily suspended its expansion plans in Australia.
Supply has begun to shrink, but the current reduction in production is still difficult to reverse the current pattern of supply and demand. We expect lithium prices to continue to decline, but the decline may gradually narrow. If it falls below the cost line of more mines and causes large-scale production stoppages in the future, the supply and demand pattern is expected to improve. It is recommended to focus on the degree of supply side clearance.
Risk warning: Downstream demand in the industry fell short of expectations, lithium prices fell beyond expectations, etc.