The company released its 2024 mid-year report. It achieved a profit of 0.239 billion yuan in the first half of the year, a year-on-year decrease of 6.12%. The company's shipments continued to grow, profitability increased steadily, and overseas production capacity construction progressed steadily. It is expected to open up room for overseas growth and maintain an increase in holdings rating in the future.

Key points to support ratings

Profit for the first half of 2024 fell 6.12% year on year, in line with expectations: the company released the 2024 semi-annual report, and achieved revenue of 6.3 billion yuan in the first half of the year, a year-on-year decrease of 22.43%; achieved profit of 0.239 billion yuan, a year-on-year decrease of 6.12%; after deducting non-profit 0.22 billion yuan, a year-on-year decrease of 3.24%. According to the company's semi-annual report calculation, 2024Q2 achieved a profit of 0.128 billion yuan, a year-on-year decrease of 8.12% and a year-on-month increase of 14.84%; after deducting non-profit 0.117 billion yuan, a year-on-year decrease of 9.00% and a year-on-month increase of 14.10%. The company previously released a quick performance report. It is expected to achieve a profit of 0.239 billion yuan in the first half of the year, and the company's performance is in line with expectations.

Shipments continued to grow and profitability increased: In the first half of 2024, the company benefited from the recovery of the consumer market and increased sales of new energy vehicles, and sales of lithium cobalate and ternary material cathodes maintained an upward trend. According to the company's disclosure, in the first half of 2024, the company's lithium battery cathode materials achieved sales of 0.0448 million tons, including 0.0184 million tons of lithium cobalate, an increase of 29.98% over the previous year, further increasing its market share and stabilizing its leading position; ternary materials achieved sales of 0.0263 million tons, an increase of 108.59% over the previous year.

In terms of hydrogen energy materials, sales of hydrogen storage alloys were 1859.99 tons, an increase of 7.53% over the previous year, and continued to maintain the leading position in the industry. The company's profitability remained stable. In the first half of 2024, the company achieved a gross sales margin of 9.51%, an increase of 1.86 percentage points over the previous year. Among them, in 2024Q2, the gross sales margin was 11.62%, an increase of 4.02 percentage points over the previous year.

New product development is progressing steadily, and overseas production capacity has begun early preparations: the company is actively promoting new product development and verification. In terms of lithium cobalate, 4.53V lithium cobalate has passed multiple terminal project certification and has begun small-batch shipments; in terms of ternary materials, the overall performance and quality of the new generation Ni6 series high-voltage materials are stable, and mass production is expected in the second half of the year; in terms of solid state battery materials, the structural stability of lithium lanthanum zirconium oxide LLZO is significantly improved through doping and coating methods. In addition, preliminary preparations for the construction of the 0.04 million tons of ternary materials project with an annual output of 0.04 million tons at the company's French base are progressing smoothly, which is expected to open up space for overseas growth in the future.

valuations

Based on the company's interim report and recent industry conditions, we expect the company's 2024-2026 earnings per share to be 1.30/1.69/2.14 yuan, corresponding to a price-earnings ratio of 22.9/17.6/13.9 times; maintaining an increase in holdings rating.

The main risks faced by ratings

Demand in the industrial chain fell short of expectations; raw material prices fluctuated unfavourably; NEV industry policies fell short of expectations; NEV products fell short of expectations.