Key points of investment

The company released its 2024 semi-annual report. In the first half of 2024, it achieved revenue of 30.05 billion yuan, -9.9% year on year; realized net profit of 1.67 billion yuan, or -19.9% year on year; net profit after deducting non-return to mother of 1.75 billion yuan, or -4.7% year on year. Looking at a single quarter, 24Q2 revenue was 15.09 billion yuan, +6.0% year over month, +0.8% month on month; realized net profit of 1.15 billion yuan, +8.2% year on year, and +119.8% month on month; after deducting non-net profit of 1.18 billion yuan, +40.4% year over year and +108.5% month on month.

24Q2 nickel prices led to a significant increase in gross margin. Nickel shipments surged year-on-year. According to Wind, the average price of LME nickel 24Q2 was 0.0186 million US dollars/ton, an increase of 11% over the previous month. The company's Q2 gross sales margin reached 21.0%, +7.8% year over year and +8.9% month over month. Thanks to Huafei's 0.12 million-ton nickel metal-weight hydrometallurgical smelting project reaching production at the end of the first quarter, the company's nickel product shipments increased sharply year-on-year in the first half of the year. In the first half of 2024, the company shipped about 0.076 million tons of nickel products, an increase of more than 40% over the previous year. The total shipment volume of nickel intermediates was about 0.112 million tons, an increase of more than 90% over the previous year.

The company's nickel project has a production capacity of 0.225 million tons, and several projects are progressing in an orderly manner

The company's Huafei 0.12 million-ton nickel metal-weight wet smelting project reached production at the end of the first quarter. The Huayue 0.06 million-ton nickel metal-weight wet smelting project was steadily overproduced, and the SCM slurry pipeline was fully completed; Huake's 0.045 million-ton nickel high-metal-weight ice nickel project operated steadily, and the company had a total production capacity of 0.225 million tons of nickel intermediates. In addition, preliminary preparations for the construction of the Pomalaa wet process project in cooperation with Vale and Ford Motor were carried out in an orderly manner; the Sorowako wet process project in cooperation with Vale progressed in an orderly manner; the company's IPIP park was included in Indonesia's national strategic project as the company's first self-operated park; and nickel ore resource reserves were further strengthened through participation in mining projects such as WKM. In Indonesia, relying on the advantages of upstream resource development, the downstream extension of the industrial chain is being promoted. Huaxiang's 0.05 million tons of nickel sulfate project is progressing in an orderly manner, further enhancing the collaborative advantages of the Indonesian nickel industry.

The company's precursor and cathode materials are progressing steadily

Shipments of 2024H1 lithium battery cathode precursors were 0.067 million tons, an increase of about 11% over the previous year, and shipments of sodium electric precursors reached the 100 ton level. Shipments of cathode materials were 0.053 million tons, a slight year-on-year decline, but increased by more than 20% month-on-month in the second quarter. The company's multiple precursor and cathode material projects are progressing steadily, and Huaneng has begun construction of a 0.05 million ton three-pre precursor project, further enhancing the Indonesian nickel industry's synergy. In South Korea, some production lines of the Gumi cathode project in cooperation with LG were put into operation and entered the North American market; in Europe, construction of the first phase of the 0.025 million-ton Hungarian cathode materials project began, and the company took substantial steps into the European market.

Profit forecasting

We expect the company's net profit to reach 3.31/4.09/4.54 billion yuan in 2024-2026, respectively, -1.3%/+23.7%/+10.9% year-on-year, maintaining the company's “buy” rating.

Risk warning

1) If the future sales volume of new energy vehicles falls short of expectations, it will affect the company's sales of tertiary precursors and regular-priced materials, and the company's profitability will decline. 2) The company has many overseas projects, and there are certain business risks. 3) The risk of significant price fluctuations of metals such as copper, cobalt and nickel.