Huayou Cobalt Releases 2024 Semi-Annual Report

The company achieved revenue of 30.05 billion yuan in 2024 H1, -9.88% year-on-year; realized net profit to mother of 1.671 billion yuan, or -19.87% year-on-year. The company achieved revenue of 15.088 billion yuan in Q2, +5.99% year over year, and realized net profit of 1.148 billion yuan to mother, +8.23% year over year and +119.81% month on month.

Shipments of cobalt products increased, and rising copper prices contributed to profit elasticity

Cobalt products: The company's 24H1 cobalt product revenue was 2.218 billion yuan, which was mainly affected by the decline in cobalt prices. The average price of cobalt in the first half of 2024 was about 0.2199 million/ton, or -22.58%; in terms of volume, 24H1 cobalt products shipped about 0.023 million tons (including internal self-supply), maintaining a leading position in the industry; copper products: rising copper prices combined with steady production and sales volume led to revenue growth. 24H1's copper product revenue reached 2.96 billion yuan, +17.45% compared to the same period last year.

The volume and price of the nickel sector rose sharply in Q2, and there is plenty of potential for subsequent growth

Price: According to Tonghuashun data, the average spot price of 24H1 nickel was 0.138 million yuan/ton, but the average spot price of 24H2 nickel was 0.143 million yuan/ton, an increase of 7.87 percent over Q1. Overall, nickel prices hit the cost line and gradually rebounded, which is expected to drive nickel products to increase profits. Volume: Huafei's 0.12 million-ton nickel metal-weight hydrometallurgy project was put into production at the end of the 24q1 phase. The increase in upstream and downstream nickel products was significant. The shipment volume of 24H1 nickel products was about 0.076 million tons (including internal self-supply), 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. Active demand in the nickel market contributed to room for subsequent growth, and is expected to continue to unleash profit potential.

Precursor shipments increased, continuing to deepen lithium battery material integration. The company continued to deepen lithium battery material integration, broaden market advantages, and open up a new path of performance growth. Shipments of 2024H1 lithium battery cathode precursors were 0.067 million tons (including ternary precursors and cobalt tetroxide, including internal self-supply), up about 11% year over year; sodium precursor shipments reached the 100 ton level; cathode material shipments of 0.053 million tons (including internal self-supply and shareholding company equity), declined slightly year-on-year, but increased slightly from Q2 Over 20%.

Promote multiple upstream and downstream projects, and establish stable integration advantages overseas

On the resource side, Huafei's 0.12 million-ton and Huayue 0.06 million-ton high-ice nickel projects and Huake's 0.045 million-ton high-ice nickel project are operating steadily. The company's Pomalaa, which has cooperated with Vale and Ford Motor, and Sorowako wet process projects with Vale are progressing in an orderly manner, while participating in mining projects such as WKM to further enhance nickel ore resource reserves. The company uses upstream advantages to dig deeper into overseas downstream industries: Indonesia's Huaxiang 0.05 million ton nickel sulfate project progressed in an orderly manner, and Huaneng started construction of a 0.05 million ton tertiary precursor project with an annual output of 0.05 million tons, further enhancing the collaborative advantages of the Indonesian nickel industry. In addition, the pace of the company's entry into markets on other continents has accelerated: part of the production line of the Gumi cathode project in cooperation with LG in South Korea was put into operation; construction of the first 0.025 million ton project for Hungarian cathode materials began, etc.

Investment advice

We expect the company's net profit to be 3.408/4.048/4.795 billion yuan in 2024-2026 (the previous value was 7.05/8.76 billion yuan in 2024/2025, respectively, considering the reduction in energy metal price fluctuations), and the corresponding PE will be 10.7/9.0/7.6 times, respectively, to maintain a “buy” rating.

Risk warning

Energy metal prices fluctuate greatly; exchange rates fluctuate greatly; overseas business risks; downstream demand falls short of expectations, etc.