The performance was stable month-on-month, demonstrating the resilience of the leaders. The company recently released its 2024 three-quarter report. In the first three quarters, it achieved operating income of 5.525 billion yuan, or -55.95% year on year; net profit to mother of 0.464 billion yuan, or -68.87% year on year. Looking at the third quarter of a single quarter, the company achieved operating income of 1.984 billion yuan, or -52.10%, and -2.01% month-on-month; realized net profit to mother 0.177 billion yuan, -68.66% year-on-year, +0.53% month-on-month. As a leading global lithium battery cathode company, the company maintained steady operating performance when the overall profit margins of the industry narrowed and fluctuating pressure increased, demonstrating its leading advantage.

International high-end production capacity is progressing steadily and is deeply integrated into the supply chains of major customers. The company is deeply involved in overseas markets. In the first half of 2024, the overseas gross margin of lithium battery materials reached 21.1%, 9.3pct higher than the domestic market, which is an important source of the company's profit resilience. The company's production capacity is spread all over the world, and it has successfully completed the establishment of overseas subsidiaries in Hong Kong, Luxembourg and Finland. Among them, the overall plan for the European project is 0.5 million tons, including 0.2 million tons of diverse materials and 0.3 million tons of lithium iron phosphate (manganese). Its completion and commissioning is expected to meet the localized supply and capacity support needs of major international customers and strengthen its leading position in the international high-end supply chain.

Phosphate cathodes are rapidly released, and solid-state battery materials seize the opportunity. The company firmly lays out diversified technical routes. Lithium iron phosphate (manganese) materials have been successfully introduced into domestic first-class power and energy storage battery customers such as China Innovation Airlines, Everweft Lithium Energy, and Lanjun New Energy. Sales increased several times year-on-year in the first half of this year, with cumulative shipments exceeding 10,000 tons. With the Panzhihua base put into operation, it is expected to contribute to profit growth. In response to potential future market demand and technology trends, the company deployed key materials for solid lithium batteries ahead of schedule. In terms of cathode materials, the company shipped hundreds of tons in the first half of the year, and was successfully introduced to solid-state battery customers such as Huineng, Qingtao, Weilan New Energy, and Ganfeng Lithium, and successfully loaded into solid state models of first-tier car companies such as SAIC Motor; in terms of solid state electrolyte development, it is expected that nanoscale solid electrolytes with high ionic conductivity and high stability can be achieved with R&D advantages to seize the development opportunities brought by new technology.

We forecast that the company's earnings per share for 2024-2026 will be 1.58, 1.83, and 2.31 yuan, respectively (the previous 24-25 forecast values were 4.57 and 5.11 yuan. The main reason for the downgrade was that the 2024 three-yuan cathode was due to a slowdown in overseas market demand growth, and the company's lithium iron production capacity climbed down profits in the early stages). According to comparable company valuation levels, the company was given 28 times PE in 2025. The company had a reasonable total market value of 25.928 billion yuan, corresponding to the company's overall target price of 51.24 yuan, maintaining the purchase rating.

Risk warning

Demand for downstream lithium batteries falls short of expectations; changes in power battery technology routes; fluctuations in upstream raw material prices cannot be transmitted downward; production capacity investment falls short of expectations; industry competition intensifies, etc.