Matters:

Rongbai Technology released its 2024 semi-annual report: the company's 2024 H1 revenue was 6.888 billion yuan, down 46.58%; net profit to mother was 0.01 billion yuan, -97.29% year over year; net profit without return to mother was 0.004 billion yuan, -101.17% year over year.

Among them, 24Q2 achieved revenue of 3.196 billion yuan, -13.43% month-on-month; net profit of 0.048 billion yuan, +227.6% month-on-month; net profit after deducting non-attributable net profit of 0.035 billion yuan, +190.06% month-on-month; comments:

Quarterly shipments increased, and market share continued to lead. In 2024, sales of H1's main products were 0.0549 million tons, up 18.17%; among them, sales of high-nickel ternary cathode materials were 0.0527 million tons, up about 17% year on year, with a global market share of 20% and a domestic market share of 39%, continuing to maintain a leading position; sales of tertiary precursor materials increased 11% year on year, and monthly shipments reached a record high. With the large-scale application of high-energy density batteries such as Kirin batteries, large cylindrical batteries, and solid-state batteries on the market in the first half of '24, the company achieved large-scale mass production of 9 series ultra-high nickel products and guaranteed stable supply. The cumulative sales volume of 9 series products was 0.012 million tons, accounting for nearly 25%.

Vigorously expand the international market and continue to promote production capacity construction. The first phase of the 0.02 million tons/year production line at the company's Korean base has completed technical transformation; the construction of the second phase of 0.04 million tons/year material production capacity is progressing rapidly; the North American subsidiary has completed registration, and the selection of factory sites in the North American region is progressing steadily; Europe will officially begin investment and construction work, and equipment automation and production line digitalization will be further upgraded. The company signed a cooperation agreement with LGES, and overseas cathode materials and precursor production lines have passed multiple customer audits and certifications. The company is also actively promoting cooperation on new products such as 6 series, solid state, and lithium manganese phosphate, and the share of overseas customer shipments is expected to increase.

Increase investment in R&D and enhance technological leadership. During the reporting period, R&D expenses were 0.179 billion, +49.07% YoY.

The company's research mainly focuses on upgrading key materials for lithium iron phosphate batteries and ternary batteries: low-cost, high-performance solid-liquid integrated products were verified in the first half of the year, and full mass production is expected to be achieved in the second half of the year; the low-cost, high-performance new process for lithium manganese phosphate liquid phase precursors has achieved mass shipment; the polyanionic sodium electrodes developed by the company have been officially mass-produced, and the comprehensive performance has reached the leading level of the industry; in the field of ultra-high performance products, ultra-high capacity ternary cathodes and all-solid ternary cathodes have entered the pilot testing stage in some battery cell clients.

Investment advice: The company's accelerated overseas expansion as a global high-nickel leader is expected to usher in a new round of growth, but considering that the price drop of the company's main product, ternary cathode materials, exceeded our previous expectations, we adjusted the company's 2024-2026 net profit to 0.207/0.528/0.644 billion yuan (the original forecast value was 0.731/0.983/1.269 billion yuan), and the current market value of PE is 53/21/17 times, respectively. Referring to comparable company estimates, the 2025 25x PE was given, and the corresponding target price was 27.32 yuan, maintaining a “strong push” rating.

Risk warning: sales volume of cathode materials falling short of expectations, risk of fluctuating raw material prices, risk of increased market competition, insufficient capacity utilization, etc.;