[Investment points

The performance was in line with expectations. The company's 24Q1-3 revenue was 2.32 billion yuan, same -45%, net profit of 1.87 billion yuan, same -37%; of which 24Q3 revenue was 0.56 billion yuan, -60%/-51%, net profit to mother 0.57 billion yuan, year-on-month, -39%/-26%, gross profit margin 33%, gross profit margin 33%, -28/-16pct, net profit margin to mother 102%, year-on-month, +34/+35pct, in line with month-on-month

Lithium: Q3 production and sales were in line with expectations, and the cost per ton fell month-on-month. 24Q1-3 lithium carbonate production was 9278 tons, up 13%, and sales volume was 10210 tons, up 32%; of these, Q3 production was 3469 tons, up 1%; sales volume was 2,580 tons, down 30%. We expect annual sales volume of 0.012 million tons+. In terms of price cost, 24Q1-3 lithium carbonate achieved revenue of 0.81 billion yuan, an average price of 0.089 million/ton including tax, a decrease of 64%, and an average sales cost of 0.0398 million yuan/ton, an increase of 2.4%; of these, Q3 revenue was 0.17 billion yuan, operating cost 0.09 billion yuan, average tax-inclusive price 0.076 million yuan/ton, a 25% reduction, and a sales cost of 0.035 million yuan per ton, mainly affected by 17% Seasonal factors affect the improvement of adsorption efficiency, etc.

Potassium: Q3 was affected by the discontinuation of production and maintenance, and production and sales declined and costs rose. 24Q1-3 potash production was 0.76 million tons, a decrease of 1.3%, and sales volume was 0.71 million tons, a decrease of 28%; of these, Q3 production was 0.23 million tons, a decrease of 36%, and sales volume was 0.17 million tons, a decrease of 56%, mainly due to weak demand and suspension of production and maintenance.

In terms of price cost, the average price of 24Q1-3 potash fertilizer including tax was 2301 yuan/ton, with an average sales cost of 1,210 yuan/ton, an increase of 17%; of these, the average price of Q3 including tax was 2,415 yuan/ton, an increase of 8%, the sales cost of a single ton was 1,629 yuan, and 48%. We expect sales to resume in Q4 and the cost will drop somewhat.

Copper: Q3 production increased month-on-month, and profit levels remained high. The participating company Julong Copper 24Q1-3 produced 0.122 million tons of copper, with average sales of 0.121 million tons, with an average sales price of 0.087 million yuan and a net profit of 0.037 million yuan per ton, achieving revenue of 9.3 billion yuan and net profit of 0.43 billion yuan, corresponding investment income of 1.36 billion yuan, an increase of 34%; of these, Q3 produced 0.041 million tons of copper, an increase of 5%; the average price including tax was 0.087 million Yuan, a 5% reduction, a net profit of 0.04 million yuan per ton, a 4% reduction, achieved revenue of 3.2 billion yuan and net profit of 1.65 billion yuan, corresponding to investment income of 0.51 billion yuan, an increase of 1%. The company expects trial production of the Julong Phase II renovation and expansion project in Q1 in '26, and the annual copper production will increase to 0.3-0.35 million tons after delivery.

Q3 Operating cash flow declined and capital expenditure slowed. The company's expense ratio for the 24Q1-3 period was 8.5%, or +2.5pct, of which Q3 cost ratio was 12%, +7/+7pct; 24Q1-3 net operating cash flow was 0.6 billion yuan, or -73%, of which Q3 was 0.26 billion yuan, -74%/-56% YoY; and 24Q1-3 capital expenditure 0.09 billion yuan, or -63%, of which Q3 capital expenditure was 0.03 billion yuan, -68%/-29% YoY.

Profit forecast and investment rating: Due to the company's significant cost reduction results and the copper mine's profit contribution exceeded expectations, we raised the company's profit forecast for 2024-2026 to be 2.54/2.73/4.26 billion yuan (originally estimated to be 2.27/2.49/3.41 billion yuan), -26%/+7%/+56% year-on-year, corresponding to 18x/17x/11xPE in 24-26, maintaining the “buy” rating.

Risk warning: Production capacity release falls short of expectations, demand falls short of expectations.