Core views

2024H1 achieved revenue of 30.05 billion yuan, -10% YoY, net profit 1.67 billion yuan, or -20% YoY; of these, 2024Q2 revenue was 15.09 billion yuan, +6% YoY, +0.8% month-on-month, and 1.15 billion yuan in net profit to mother, +8% YoY and +120% month-on-month. 2024H1 Huafei Q1 finally reached production, Huayue steadily overproduced, and Huake operated steadily. The company shipped about 0.076 million tons of nickel products (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. The profit side benefited from the 2024Q2 nickel price increase, and the company's profitability improved markedly from month to month. Shipments of lithium battery materials increased steadily; shipments of 2024H1 precursors were 0.067 million tons, +11% year over year; shipments of cathode materials were 0.053 million tons, a slight year-on-year decline, but Q2 was +20% month-on-month; the profit side is still under pressure due to oversupply.

occurrences

The company released its 2024 semi-annual report.

2024H1 achieved revenue of 30.05 billion yuan, -10% year-on-year, net profit of 1.67 billion yuan, -20% year-on-year, and 1.75 billion yuan after deduction, -5% year-on-year.

Among them, 2024Q2 revenue was 15.09 billion yuan, +6% YoY, +0.8% month-on-month, net profit 1.15 billion yuan, +8% YoY, +120% month-on-month, and 1.18 billion yuan after deduction, +40% YoY and +109% month-on-month.

Brief review

Nickel: Sales are growing rapidly, and price increases have increased profits.

In terms of sales, 2024H1 shipped about 0.076 million tons of nickel products (including internal self-supply), up more than 40% year on year; total shipments of nickel intermediates were about 0.112 million tons, up more than 90% year on year.

In terms of production capacity, the nickel projects planned by the company in the early stages have been put into operation one after another, including:

Huafei: The 0.12 million-ton nickel metal-weight hydrometallurgical smelting project ended production in Q1;

Huayue: The 0.06 million-ton nickel-metal hydrometallurgical smelting project was stable and overproduced, and the entire SCM slurry pipeline was completed;

Huake: Stable operation of the 0.045 million ton high nickel metal content ice nickel project;

Huaxiang: The project to produce 0.05 million tons of nickel sulfate per year is progressing in an orderly manner. The synergy of Indonesia's nickel industry has been further strengthened.

On the positive side, benefiting from the 2024Q2 nickel price increase, the company's profitability improved markedly from month to month.

The average spot price of 2024Q2 LME nickel was 0.0184 million US dollars/ton, up 0.0018 million US dollars/ton from month to month, and the company's profit increased markedly.

Lithium battery materials: Shipments are growing steadily, and oversupply in the industry is putting pressure on profits.

In terms of volume, 2024H1 shipped 0.067 million tons of lithium battery cathode precursors (including ternary precursors and cobalt tetroxide, including internal self-supply), +11% compared to the same period; shipments of sodium electric precursors reached the 100-ton level; shipments of cathode materials were 0.053 million tons (including internal self-supply and equity of participating companies), which declined slightly year-on-year, but Q2 was more than 20% month-on-month. Part of the production line of the Gumi Cathode Project in South Korea, which the company cooperated with LG, was put into operation, contributing an increase over the previous month.

On the customer side, the company's main products have covered global power battery factories such as Ningde Era, LGES, Samsung SDI, Guoxuan Hi-Tech, Everweft Lithium Energy, and Envision AESC. The terminals are used in domestic and foreign car brands such as Tesla, BMW, Stellantis, Volkswagen, Hyundai, GM, Ford, Daimler, Renault, Jikrypton, Changan, and Geely.

In terms of profit, the company's 2024H1 positive pole business gross profit margin was 8.7%, and the profit margin of the precursor business was 15.6%. Profitability declined due to the low processing costs of the industry. Among them, Cathode was calculated using Chengdu Bamo's net profit of 0.1 billion yuan, which corresponds to a profit of about 0.0019 million yuan/ton per ton, down about 0.003-0.004 million yuan from 2023 as a whole.

Lithium: The African project was successfully put into operation, and profits are under pressure in the short term.

In terms of production capacity, the company's Arcadia lithium project in Zimbabwe is operating in an orderly manner. The lithium carbonate production line for the battery-grade lithium salt project with an annual output of 0.05 million tons in Guangxi has met production standards, and an integrated industrial system from lithium ore to lithium salt has been formed.

In terms of profit, the gross profit margin of the 2024H1 lithium product business is 4.6%, down 8.3 pct from 2023. The main reason is that lithium prices once again entered the downward channel from April 2024, falling from a high of 0.113 million/ton to around 0.09 million/ton at the end of June, and Q3 prices are still declining. In the short term, profits are still under pressure. In the long run, the lithium resource layout can guarantee the stability of raw materials supply to the lithium battery business.

Copper: Shipments have remained stable, and profit benefits and price increases have increased markedly.

The company's copper product output scale remains stable. It is estimated that 2024H1 copper products will sell 0.04-0.05 million tons, with a gross profit margin of 35.5%, an increase of 6.9 pct compared to 2023. Profitability has increased significantly, mainly due to the rapid rise in Q2 copper prices. The average price of Changjiang non-ferrous copper 1 #Q2 is 0.0798 million/ton, an increase of 0.01 million yuan over the previous month.

Cobalt: Shipments are growing steadily, and profits are being pressured by prices.

2024H1 shipped about 0.023 million tons of cobalt products (including internal self-supply), with a year-on-year ratio of +13%, maintaining a leading position in the industry; the gross profit margin was 17.2%. Under the influence of the continued decline in cobalt prices, there is still some pressure on profitability.

Profit forecast: The company's net profit is expected to be 3.49 and 4.21 billion yuan in 2024-25, corresponding to 11 or 9 times PE.

Risk analysis

1) Downstream NEV production and sales fall short of expectations: the sales side may be affected by weak demand and fall short of expectations; the production side may be affected by large fluctuations in upstream raw material prices, power restrictions, etc., which in turn affects the company's related business shipments and profitability.

2) The rise in raw material prices exceeded expectations: Since 2021, raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, while at the same time disrupting the company's short-term performance.

3) The company's key projects fall short of expectations: As a participant in the new energy circuit, the promotion of key projects is the key to supporting revenue and profit, and is also a reflection of the company's growth. Failure to advance key projects as expected will affect current and long-term performance.