The company achieved net profit of 0.239 billion yuan to mother in 2024H1, -6% year-on-year. In 2024H1, the company achieved revenue of 6.3 billion yuan, -22% year over year; realized net profit to mother of 0.239 billion yuan, -6% year over year; gross margin was 9.51%, +1.86pct year on year. The company achieved revenue of 3.001 billion yuan in 2024Q2, -34% YoY and -9% month-on-month; realized net profit of 0.128 billion yuan, -8% YoY and +15% month-on-month; gross margin was 11.62%, +3.74pct YoY, and +4.02pct month-on-month.

The company's Q2 lithium cobalate sales increased steadily, and cathode profitability improved significantly. The steady recovery of the 2024H1 consumer electronics market is driving continued growth in demand for lithium cobalate. The recognition of nickel high-voltage ternary materials in the power battery market continues to increase, but ternary materials as a whole are still under great competitive pressure from lithium iron phosphate. The company sold 0.0448 million tons of 2024H1 cathodes, +57% year over year; of these, lithium cobalate sold 0.0184 million tons, +30% year over year, and 0.0263 million tons of ternary cathodes, +109% year over year. The company's market share of ternary cathodes and lithium cobalate has increased steadily. We estimate that the company will sell 0.0205 million tons of cathodes in 2024Q2, -16% month-on-month; of these, lithium cobalate sales will be 0.01 million tons, +19% month-on-month, and 0.0104 million tons of ternary cathodes, or -35% month-on-month. We estimate that in 2024Q2, the non-net profit of the company's positive electrode per ton deducted was about 0.0057 million yuan, an increase of about 0.0015 million yuan over the previous month. The company's share of lithium cobalate cathode sales continues to increase, boosting a steady improvement in profitability.

The company's overseas project layout is progressing smoothly. The company's French joint venture 0.04 million-ton ternary cathode material project is progressing steadily, and preparations for plant construction are progressing smoothly. On August 2, the company announced that its wholly-owned subsidiary European Xiamen Tungsten Xinneng and Orano PCAM will establish a new joint venture in France, Xia Tungsten Xinneng Technology (Xiamen Tungsten Xinneng holds 49% of the shares). The joint venture plans to invest in the construction of a 0.04 million-ton ternary precursor project. The total investment amount of the project is estimated to be 3.16 billion yuan (tax included).

The company's material products continue to be iteratively upgraded, and the application fields are constantly being expanded. In terms of ternary cathodes, the company's next-generation Ni 6 series high-voltage materials are expected to be mass-produced by 2024H2; high-nickel ternary materials are entering the mass production or certification stage in several overseas customer projects. In terms of lithium cobalate cathodes, the company's 4.53V products have been certified in multiple terminal projects and small-batch shipments have begun; the 4.55V lithium cobalate development progress meets customer needs and is currently in a small trial stage. In addition, the company is actively expanding new product application scenarios. In low-altitude fields such as drones, the company's next-generation ternary materials project has achieved technical upgrades and completed small trials within the customer planning cycle.

Risk warning: Electric vehicle sales fall short of expectations; raw material prices fluctuate greatly; demand for three yuan falls short of expectations.

Investment advice: Lower profit forecasts and maintain the “better than the market” rating. Based on the slow growth rate of ternary cathode demand due to the slump in the share of ternary power batteries, we lowered our profit forecast. The company's net profit for 2024-2026 is 0.592/0.743/0.895 billion yuan (the original forecast was 0.861/0.993 billion yuan for 2024-2025), +12%/+26%/+20% YoY, EPS is 1.41/1.77/2.13 yuan, and dynamic PE is 21/17/14 times.