Core views

2024H1 achieved revenue of 3.541 billion yuan, -58% year-on-year, net profit of 0.287 billion yuan, or -69% year-on-year, after deduction of 0.217 billion yuan, or -80% year-on-year. In the first half of 2024, the company's output of cathode materials totaled 0.036 million tons, 0.0209 million tons of lithium cobalate, 0.018 million tons of lithium cobalate, and 0.0133 million tons of lithium iron phosphate (manganese). Among them, lithium iron cathodes benefited from the boom in terminal energy storage, and Q2 increased more than 2 times over the previous month. A total of hundreds of tons of solid-state battery cathodes were shipped in the first half of 2024. They were successfully introduced to solid-state battery customers such as Huineng, Qingtao, Weilan New Energy, and Ganfeng Lithium, and successfully loaded and used in solid-state models of first-tier car companies such as SAIC Motor Group.

occurrences

The company released its 2024 mid-year report.

2024H1 achieved revenue of 3.541 billion yuan, -58% year-on-year, net profit of 0.287 billion yuan, or -69% year-on-year, after deduction of 0.217 billion yuan, or -80% year-on-year.

Among them, 2024Q2 revenue was 2.025 billion yuan, -45% YoY, +33% month-on-month, net profit 0.176 billion yuan, -64% YoY, +60% month-on-month, and 0.112 billion yuan after deduction, -82% YoY and +8% month-on-month.

Brief review

Quantity: Stable shipment of ternary cathodes, rapid delivery of lithium iron phosphate cathodes.

In terms of production and marketing, the company produced a total of 0.036 million tons of cathode materials in the first half of 2024, of which:

By product: the output of ternary cathode materials is 0.0209 million tons, the lithium cobalt oxide cathode output is 0.0018 million tons, and the lithium iron phosphate (manganese) phosphate cathode output is 0.0133 million tons;

On a quarterly basis, production and sales of 2024Q1/Q2 cathode materials are expected to be 0.014 and 0.022 million tons, respectively, of which 0.011 and 0.012 million tons of ternary and lithium cobalate cathodes are basically flat, mainly due to weak European and American tram sales and demand from overseas battery manufacturers; production and sales of lithium iron cathodes are 0.003 and 0.01 million tons, increasing more than 2 times month-on-month, mainly benefiting from the high energy storage boom in terminals.

On the customer side, the company has established stable cooperative relationships with first-tier brand power battery and vehicle companies such as LG New Energy, SK ON, Samsung SDI, Murata, and major European and American customers, and the product supply has entered overseas NEV companies such as Volkswagen, Hyundai, Daimler, and BMW.

Benefits: The ternary cathode has stable profits, and the lithium iron cathode has reduced losses.

In terms of gross margin, the gross profit margin of 2024H1 domestic business was 11.8%, -3.37pct year on year, mainly due to relatively intense domestic price competition; the gross profit margin for overseas business was 21.1%, -0.5pct year on year. The decline was relatively low, and profitability was better than domestic.

In terms of profit per ton, the 2024H1 ternary cathode business made a profit of about 0.01 million yuan per ton, benefiting from a relatively high share of overseas customers and maintaining leading profitability in the industry; the lithium iron cathode business is expected to remain in a state of loss, but Q2 reduced losses from month to month, driven by a marked increase in capacity utilization.

In terms of overseas production capacity, the European project has a master plan of 0.5 million tons, including 0.2 million tons of multi-material and 0.3 million tons of lithium iron phosphate (manganese), which will be built in stages. The first phase of the project will build a high-nickel multi-material production line with an annual output of 0.06 million tons. The production line is designed according to the requirements of ultra-high nickel and high nickel polycrystals and single crystals, and also has the capacity to produce nickel products in use.

In terms of solid state battery cathodes, hundreds of tons were shipped in the first half of 2024. Solid-state battery customers such as Huineng, Qingtao, Weilan New Energy, and Ganfeng Lithium have been successfully loaded and used in solid-state models of first-tier car companies such as SAIC Motor Group.

In terms of non-recurring profit and loss, the company's non-recurring profit and loss for the first half of 2024 was 0.07 billion yuan, of which some customer arrears were recovered, and 0.027 billion yuan was prepared to be transferred back from individual accounts for bad debts, and 0.045 billion yuan was provided by the government.

Investment advice: The company's net profit to mother is expected to be 0.6 or 0.77 billion yuan in 2024-25, corresponding to 25 or 20 times PE.

Risk analysis

1) Downstream NEV production and sales fall short of expectations, causing the company's product sales to fall short of expectations: the sales side may be affected by changes in the macro environment and weak phased demand; the production side may fall short of expectations by large fluctuations in upstream raw material prices, electricity restrictions, environmental requirements, etc., which in turn affects the company's related business shipments and profitability.

2) Prices of raw materials, such as lithium, have risen more than expected: raw material prices have continued to rise since 2021, while raw material prices have fluctuated greatly in stages. High prices and instability have had a certain impact on terminal demand, and at the same time disrupted the company's short-term performance.

3) The expansion of the company's key projects falls short of expectations. The development needs of the new energy industry. The promotion of key projects is a vehicle for comprehensive competitiveness in production capacity, cost and technology. Failure to expand key projects as expected may reduce the company's competitiveness.