Incidents. On October 29, 2024, the company released its 2024 three-quarter report. Looking at January-September, the company achieved operating income of 15.879 billion yuan, or -53.74%; net profit to mother was 0.491 billion yuan, -68.18% YoY; net profit after deduction was 0.476 billion yuan, -68.15% YoY. Looking at Q3 alone, the company achieved operating income of 5.098 billion yuan, or -54.28%; net profit to mother was 0.101 billion yuan, -66.56% YoY; net profit after deduction was 0.096 billion yuan, -65.18% YoY.

Sales are growing rapidly, and net profit per ton is expected to improve. In terms of shipment volume, in January-September, the company's sales volume of phosphate cathode materials reached 0.4761 million tons, +29.57% year-on-year. Among them, energy storage products accounted for about 39.6% of shipments. The company attaches great importance to technological iteration. The new CN-5 series and YN-9 series sold about 0.094 million tons, accounting for about 19.76% of the overall sales volume. 24Q3 sold 0.167 million tons of cathode materials and performed well. In terms of profit, according to our estimates, 24Q3's net profit per ton of lithium iron was 0.0006 million yuan/ton, mainly due to falling lithium carbonate prices and increased competition in the industry. Looking forward to the future, the price of lithium carbonate will stabilize, and the relationship between supply and demand in the industry will gradually improve. The company is expected to achieve profitable development with integrated advantages and the release of new products.

High-end products are progressing smoothly. Technology stands up to promote product innovation and iteration: 1) The CN-5 series, a new energy storage product, has great advantages in terms of cycle life, energy efficiency, and energy density, and some indicators are superior to the original product. 2) The YN-9 series is mainly characterized by high energy density, etc., and is used in power batteries. 3) Lithium manganese iron phosphate: R&D is progressing smoothly, and it has maintained close R&D cooperation with Head Battery Factory. Currently, it is the only manufacturer that can meet the requirements of the Head Battery Factory's upcoming mass production project. The company grasps industry trends, and technology accumulation over the years has accelerated transformation into achievements. The performance of new high-end products has been positively recognized by customers. After the production line at the Yunnan base is put into operation, it may effectively meet the differentiated needs of customers.

Integration accelerates, and the profit center is expected to move upward. In 2023, the company competed for Dashichang phosphate prospecting rights and Huangjiapo phosphate prospecting rights in Fuquan City, Guizhou Province. In April 2024, the company obtained the Huangjiapo phosphate mining license, which is progressing rapidly. Up to now, the company has completed exploration and conversion of the first mining site of the Dashichang phosphate mine. The production scale in this mining area is 2.5 million tons/year, further strengthening the level of company integration, smoothing the impact of price fluctuations on the raw material side on the company's costs, and helping to enhance resilience to risks and profitability.

Investment advice: The development of new energy vehicles is on the rise, and first-tier lithium iron manufacturers have advantages in technology, products, customers, and production capacity. The company's new products are gradually being increased, and superposition integration accelerates or effectively improves quality and costs, and the profit level is expected to return to an upward trend. We expect the company to achieve revenue of 247.0, 326.4, and 40.98 billion yuan in 2024-2026, a year-on-year change of -40.3%, +32.1%, and +25.5%; net profit to mother of 0.93, 1.99, and 2.84 billion yuan, with year-on-year changes of -40.9%, +112.8%, and +43.0% year-on-year. The current stock price corresponds to the 2024-2026 price-earnings ratio of 38, 18, and 12 times, respectively. Considering that the company's large-scale effect is prominent, the increase in new products is superimposed on the advantages of integration, and the “recommended” rating is maintained.

Risk warning: NEV sales fall short of expectations, industry competition intensifies, new technology development falls short of expectations, etc.