Introduction to this report:

The company's performance for the first half of '24 was basically in line with expectations. I am optimistic that the diversification of the company's nickel, cobalt, phosphorus and sodium products and the integrated layout of nickel ore smelting and intermediate products will promote long-term performance growth.

Key points of investment:

Maintain an increase in holdings rating. Considering that the gradual liquidation of the industry may have an impact on the company's profitability increase, the 24-26 EPS was 2.18 (-0.15) yuan, 2.59 (-0.17) yuan, and 3.03 (-0.29) yuan. Refer to the comparison company's 24-year 15.7X PE, and the target price for the downgrade is 34.23 yuan.

The results were generally in line with expectations. In the first half of '24, the company achieved revenue of 20.086 billion yuan, an increase of 16.3%; net profit to mother of 0.864 billion yuan, an increase of 12.5%; 24Q2 achieved net profit to mother of 0.485 billion yuan, an increase of 13.5% and 27.9%.

The growth of tertiary precursors is slowing down, and multiple products are being deployed globally. According to Xinyi data, in the first half of 2024, China's ternary precursor production was 0.424 million tons, up 5.1% year on year; global three precursor production was 0.481 million tons, up 1.5% year on year; mainly affected by the slowdown in demand for new energy vehicles in Europe and the US. Under the competitive trend of the industry, the company continues to expand its products and customers, comprehensively lay out the four series of nickel, cobalt, phosphorus and sodium products, and start a global layout. As of the semi-annual report, the company has a domestic production capacity of 0.3 million tons of tertiary precursors, an overseas production capacity of 0.23 million tons, an overseas production capacity of more than 0.03 million tons of cobalt tetroxide, 0.2 million tons of iron phosphate and a planned overseas production capacity of 0.06 million tons, and a domestic production capacity of 0.008 million tons of sodium precursors. The total product sales volume exceeded 0.14 million tons in the first half of 2024, an increase of 15% over the previous year. The business covers Japan, South Korea, Southeast Asia, and Europe As well as many countries and regions such as North America.

Extend the industrial chain upward and enhance profitability. The company has now opened an integrated industrial chain of “low ice nickel - high ice nickel - nickel sulfate - high nickel ternary precursor”: in Indonesia, the Feicui Bay project and the Debon project, which are built using the integrated ice and nickel process, have all been put into operation. The NNI 0.08 million gold ton low ice nickel project and the 0.06 million gold ton ice nickel project of Indonesia's Zhongqing New Energy are all in the phase of climbing capacity; in South Korea, the company is cooperating with POSCO to promote 0.05 million tons of nickel refining and 0.11 million tons of nickel A million-ton precursor integrated industrial base construction project; in Morocco, the company and ALMADA are working together to produce 0.12 million tons of ternary precursors per year, refining their supporting raw materials, 0.06 million tons of phosphorus-based materials, and 0.03 million tons of black powder recycling. In the first half of 2024, the company's overall output of nickel products in Indonesia exceeded 0.035 million tons of metal, with a year-on-month increase of nearly 40% in the second quarter. It is expected that in the future, with the implementation and expansion of production capacity in integrated projects, the company's profit will continue to increase.

Risk warning: Industry demand falls short of expectations, and the commissioning of integrated projects falls short of expectations