Key points of investment

The results are in line with market expectations. The company's 24Q1-3 revenue was 10.1 billion yuan, same -70%, net profit to mother -5.7 billion yuan, same -170%, gross profit margin 49%, same -38 pct, net interest rate to mother -57%, same -81 pct; of these, 24Q3 revenue was 3.7 billion yuan, -58%/-5% year over month, net profit to mother -0.5 billion yuan, gross profit margin 44%, 41/-10pct, net profit margin to mother -14% Ratio -33/+21pct. The company previously predicted a net profit loss of 5.85-5.45 billion yuan for 24H1. The results were in the median forecast, in line with market expectations.

Greenbush: Q3 production increased 22% and cash costs fell 18%. On the sales side, Q3 Greenbush concentrate produced 0.406 million tons, an increase of 22%, including 0.395 million tons of chemical-grade spodumene and 11,000 tons of technical spodumene. Sales volume was 0.392 million tons, a decrease of 26%. Greenbush's FY25 production guide is 1.35-1.55 million tons, and we expect sales of 1.5 million tons+ in 24. In terms of profit, the average FOB price in Q3 was 872 US dollars/ton, down 15%, the cash cost per ton was 277 Australian dollars (183 US dollars, 0.66 exchange rate on October 31), a decrease of 18%, and profit per ton was about $570 +.

Q3 Sales increased month-on-month, high-priced inventory was gradually digested, and losses continued to narrow. On the sales side, 24Q1-3 sold 0.07 million tons+ of lithium salt, an increase of 68%; Q3 lithium salt sales were about 0.03 million tons, an increase of 25%; the Anju project is expected to be fully produced in October, and we expect sales to reach 0.1 million tons+ in 24, an increase of about 80%. On the profit side, the cost of self-supplied concentrate is calculated according to the moving weighted average method. At the end of Q3, the company purchased an additional 0.2 million tons of concentrate to further reduce the raw material cost. At the end of Q3, the domestic chemical grade lithium concentrate inventory was 0.15 million tons, and the balance cost was about $1,000 +, corresponding to the total cost of lithium carbonate of about 0.085 million yuan.

Q3 Investment returns were stable, and operating cash flow declined significantly. The company's Q1-3 investment income was -0.9 billion yuan, of which Q3 investment income was 0.22 billion yuan, +7%; Q1-3 minority shareholders' profit and loss was 7.4 billion yuan, or -48%, of which Q3 minority shareholders lost 1.8 billion yuan and -32%. Expense ratio for the Q1-3 period 5.6%, or +4.2pct, of which Q3 expense ratio was 0.4%, -0.4/-3.7 pct; 24Q1-3 net operating cash flow 4.2 billion yuan, same -79%, of which Q3 operating cash flow was 2 billion yuan, 75 %/ -315% year on month; 24Q1-3 capital expenditure 3.7 billion yuan, same +29%, of which Q3 capital expenditure was 1.2 billion yuan, +9%/+6% year on month; 24Q3 The final inventory was 2.58 billion yuan, -12% compared to the end of Q2.

Profit forecast and investment rating: Since 24 was greatly affected by high-priced concentrate inventories and SQM tax lawsuits, and lithium prices are expected to remain in the bottom range, we lowered our 2024-2026 profit forecast. We expect the company's net profit to be 5.85/1.56/2.27 billion yuan in 2024-2026 (originally estimated 0.01/4.47/5.06 billion yuan), -180%/+127%/+45%, corresponding to 37x/25xPE in 25-26, considering the company's profit quarterly The repair is about to turn a loss into a profit and maintain a “buy” rating.

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