Description of the event

In the first half of 2024, the company achieved operating income of 6.419 billion yuan, -74.14%; realized net profit to mother of 5.206 billion yuan, or -180.68% year-on-year; and realized net profit deducted from non-mother of 5.221 billion yuan. YoY -181.45%. 2024Q2 achieved operating income of 3.834 billion yuan, -71.33% YoY, +48.34% month-on-month; realized net profit attributable to mother -1.309 billion yuan, -182.99% YoY, +66.41% month-on-month; realized net profit withheld from non-mother of 1.304 billion yuan, -182.88% YoY, +66.70% month-on-month.

Incident comments

Volume increases and prices decrease, and investment returns drag down the company's performance. According to SMM, the average price of 2024H1 battery-grade lithium carbonate was 0.1037 million/ton (tax included), -68.22% year over year. (1) Greenbush: 2024H1 lithium concentrate produced 0.612 million tons, including 0.591 million tons of chemical grade and 0.021 million tons of technical grade, of which 0.30225 million tons were sold to Yabao, with a sales amount of about 2.253 billion yuan. The CGP3 plant has now completed foundation and civil engineering and entered the steel structure installation stage. It is expected that the second half of 2024 will further enter the circuit equipment installation stage. After completion, CGP3 will add 0.52 million tons/year of lithium concentrate production capacity, and concentrate production is expected in 2025. (2) Domestic lithium salt smelting: The company's sales volume of lithium compounds and derivatives increased by 30.13% year on year in the first half of the year, of which Q2 increased 46.18% month on month. However, due to past Greenbush price adjustments lagging behind high-priced inventories, smelting lost a lot. Starting this year, the pricing was changed to M-1. As high-priced inventories are digested, it is expected that the raw material costs for the Q3 smelting process will improve significantly. (3) SQM: Affected by tax supplements in the first quarter, SQM achieved net profit of 4.66 billion yuan in the first half of the year, achieved sales volume of 0.0957 million tons of lithium products, +26.92% year-on-year, and Tianqi confirmed investment income of -1.15 billion yuan.

High-priced inventory was gradually digested, and profits recovered month-on-month in the second quarter. According to SMM, the average price of 2024Q1 battery-grade lithium carbonate was 0.1015 million/ton (tax included), +4.35% month-on-month. (1) Greenbush: 2024Q2 lithium concentrate sold 0.53 million tons, produced 0.33 million tons, the average sales price was 1,020 US dollars/ton (FOB, Australia), and the cash cost was 338 Australian dollars/ton, a further decrease over the previous month. At the same time, the company announced in Q2 that it will purchase an additional 0.2 million tons of concentrate to further reduce raw material costs. (2) SQM:

SQM2024Q2 achieved net profit of 0.214 billion US dollars and sold more than 0.052 million tons of lithium salt. 2024Q2 Tianqi Lithium achieved investment income of 0.206 billion yuan, of which investment income in joint ventures was 0.26 billion yuan, and the return on investment was positive month-on-month. (3) Domestic smelting profits recovered month-on-month, and 2024Q2 lithium salt sales increased 46.18% month-on-month. (4) The company accrued 0.236 billion asset impairment losses in 2024Q2.

On the left side of the cost curve, a resource-based lithium industry leader with the ability to expand at the bottom. (1) With the world's highest quality spodumene and lithium salt lake resources, the cost advantage is leading, and it has the capacity to continue to increase at the bottom of the cycle: Greenbush further increases storage to 16 million tons of LCE, and CGP3 continues to advance construction with 0.52 million tons of production capacity and is expected to be completed and put into operation in 2025. (2) Positive progress has been made in domestic Sichuan mining resources: Yajiangzola has obtained the registration of the Tebaigou tailings depot for the Zola spodumene mine and has set up joint ventures with Snowway and Huirong Mining (which holds the right to prospecting for wood wool) to promote power infrastructure construction in the methyl card mining area. The pace of development is expected to accelerate. (3) Smelting capacity continues to expand: The company's current lithium product processing capacity has reached 0.0886 million tons, and the planned production capacity is 0.1436 million tons. On the one hand, with the gradual rise in domestic production capacity of 0.02 million tons of lithium carbonate and the advancement of the 0.03 million ton lithium hydroxide project in Zhangjiagang, the company's subsequent outsourcing processing ratio is expected to decrease to reduce the average cost of lithium salt smelting; on the other hand, the company Quinana Australia's 0.024 million tons of lithium hydroxide has passed SK On and Northvolt certification. Under the framework of the system, overseas lithium salt smelting assets are scarce.

Risk warning

1. Demand for new energy fell short of expectations, and lithium prices fell sharply;

2. The commissioning of the company's project fell short of expectations.