Key points of investment:

The leading position in precursors is stable, and 2024H1's performance is growing steadily. The company is mainly engaged in R&D, production and sales of lithium battery cathode material precursors and new nickel material products. The products include ternary/iron phosphate precursors, cobalt tetroxide, nickel, etc. 2024H1 achieved operating income of 20.086 billion yuan, +16.33% year over year; net profit to mother of 0.864 billion yuan, +12.48% year over year; gross profit margin of 12.77%, +1.67pct year on year, with a good performance growth trend.

Precursor shipments are growing rapidly, and the product structure continues to be optimized: the company's leading position is stable, and shipments of nickel and cobalt products have been ranked first in the world since 2020. 2024H1 shipped more than 0.14 million tons of nickel, cobalt, phosphorus, and sodium products, an increase of 15% over the previous year. The total sales volume of nickel and cobalt products was 0.12 million tons+, and the market share was the highest in the world. Among them, sales volume of nickel series 8 and above exceeded 0.065 million tons, and sales volume of cobalt products of 4.5v and above was nearly 0.01 million tons. The product structure continued to develop towards high-end and quality.

The nickel production capacity layout is close to 0.2 million tons, and integration is being implemented at an accelerated pace. The company used the advantages of oxygen-rich side blowing and RKEF dual technology routes to establish four major raw material production bases for nickel resource smelting in Indonesia. Currently, the Feicui Bay and Debon projects, which use the integrated ice and nickel process, have a total annual output of 0.055 million gold tons of low ice nickel have all been completed and put into full production. Indonesia's NNI 0.08 million gold ton low ice nickel project and Indonesia's Zhongqing New Energy 0.06 million gold ton ice nickel project are all in the phase of climbing capacity. 2024H1's overall output of nickel products in Indonesia exceeded 0.035 million tons of metal, an increase of nearly 40% over the previous quarter in Q2. The company's self-supply ratio of nickel is expected to reach nearly 50% in 2024. In the future, as the production capacity of the Indonesian nickel smelting project increases, the self-supply ratio will increase further.

Accelerate the construction of international production capacity, and the scope of business covers the world. In South Korea, the company and POSCO are jointly promoting a nickel refining and precursor integrated industrial base construction project. The overall project scale can achieve an annual output of 0.05 million tons of nickel refining and 0.11 million tons of precursor plants. In Morocco, the company cooperated with AL MADA to promote the refining of 0.12 million tons of ternary precursors and their supporting materials, 0.06 million tons of phosphorous materials, and 0.03 million tons of black powder recycling capacity projects, reaching out to customers in the European and American markets. At present, the company has built four major raw material bases in Indonesia overseas, and three integrated material bases under construction (South Korea, Morocco, Finland), and its business covers many countries and regions such as Japan, South Korea, Southeast Asia, Europe and North America.

Continue to focus on R&D innovation and diversify technology paths. 1) Nickel series: medium nickel polycrystalline high voltage and ultra-high nickel polycrystal precursors have passed international customer certification, solid state battery precursors have passed international customer certification and have been delivered in small batches; 2) Cobalt: 4.55V high voltage cobalt tetroxide products continue to lead technology, and various models have entered the tonnage certification stage for core customers; 3) Phosphorus: Phosphorus precursors quickly entered the first tier of the industry and completed mass production of third-generation and fourth-generation precursors; 4) Sodium: NFPP precursor series products have achieved mass production indicators, electrical performance and chemical performance Reached the leading level in the industry; integrated access to stratified oxygen smelting and precursor resources , the comprehensive cost of the precursor was reduced by 20%; 5) Manganese: 5.0V high-voltage lithium nickel-manganate precursors have been introduced to core customers to carry out small-batch verification.

Profit forecast and rating: We expect the company's net profit to be 1.928, 2.744, and 2.98 billion yuan respectively for 24-26, -0.9%, +42.3%, and +8.6% compared with the same period last year. As a leading precursor, the company gave the company a PE valuation of 18-20 times in 2024, corresponding to a reasonable value range of 37.08-41.20 yuan, with a rating of “superior to the market”.

Risk warning: risk of fluctuations in raw material prices; risk of changes in industrial policy.