Incident: On August 15, 2024, the company released its 2024 semi-annual report. During the reporting period, the company achieved operating income of 3.569 billion yuan, a year-on-year decrease of 6.44%, and achieved net profit attributable to listed companies of 0.221 billion yuan. The extent of loss was drastically reduced compared to the same period last year. The comprehensive gross profit margin was 10.16% in the first half of the year, an increase of 15.99 pcts over the previous year.

The lithium iron business continued to improve, and the lithium carbonate layout ushered in gains. The company's various high-performance, low-cost, differentiated lithium iron phosphate products were booming in production and sales in 24Q2, which achieved sales volume of 0.0745 million tons in the first half of the year, +99.1% year-on-year, and shipped 0.0479 million tons in a single quarter in the second quarter, or +79.75% month-on-month. Ongoing orders supported the steady increase in lithium iron capacity utilization, and the scale effect significantly improved product profits. The company's consolidated gross profit margin in the second quarter was 13.69%, +35.16/8.55 pcts month-on-month. If effects such as impairment losses are excluded, the loss per ton of lithium iron continues to narrow. In the future, as lithium carbonate prices stabilize and the production capacity supply pattern improves, profit elasticity can be expected to recover. During the reporting period, the company's holding subsidiary, Yichun Longpan Era 0.04 million-ton lithium carbonate project was basically completed, and a net profit of 53.7986 million yuan was achieved. As a lithium iron phosphate company with a lithium salt processing plant, the vertically integrated layout is expected to help the company withstand the risk of fluctuations in raw materials, further enhance large-scale production, and broaden the profit margin of the lithium battery materials sector.

Multi-channel financing optimizes liquidity, and overseas travel is accelerated and determined. Compared with the highly internal domestic market, all aspects of lithium batteries are currently still in short supply capacity overseas. The company focuses on the strength of the overseas lithium iron market. The 0.03 million ton lithium iron phosphate project in Indonesia has entered the trial production and commissioning stage, becoming the first Chinese company to launch a large-scale lithium iron phosphate cathode material factory overseas, and is actively promoting the expansion progress of more than 10 overseas customers including Japan, South Korea, and the United States. It successfully signed a 5-year long-term supply agreement with LGES during the reporting period to seize the opportunity for overseas battery manufacturers to switch to lithium iron. advantages. Meanwhile, in order to guarantee continued investment overseas, the company made full use of the capital market for multi-channel financing. The holding subsidiary Changzhou Liyuan achieved financing of about 0.385 billion yuan through capital increases and share expansion to introduce investors; the overseas issuance of H shares and the listing on the Hong Kong Stock Exchange Limited has now obtained an issuance and listing filing notice issued by the China Securities Regulatory Commission, and completed the annual report update in April 2024. The application materials were re-submitted to the Hong Kong Stock Exchange to optimize the asset liability structure and support the company through flexible multi-channel financing. Subsequently, production capacity expansion and business development were raised to the next level.

Investment advice: The company is expected to achieve operating income of 8.328, 11.682, and 16.446 billion yuan in 2024-2026, and achieve net profit of 0.101, 0.392, and 0.664 billion yuan, with year-on-year increases of 108.2%, 287.8%, and 69.5%. The corresponding EPS is 0.18, 0.69, and 1.10, respectively. The PE multiples corresponding to the current stock price are 36.7X, 9.5X, and 6X. The company takes the lead in overseas production capacity construction, and is deeply tied to leading customers to improve the certainty of capacity absorption. Increased concentration and improved industry sentiment are expected to bring impressive performance flexibility and maintain a “buy” rating.

Risk warning: shortage of raw materials and risk of price fluctuations; new business market expansion falls short of expectations; production capacity expansion falls short of expectations; overseas situation risk and exchange risk, etc.