Incident: On October 30, 2024, the company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 5.661 billion yuan, a year-on-year decrease of 12.81%, and achieved net profit attributable to listed companies of -0.303 billion yuan. The extent of loss continued to narrow significantly compared with the same period last year. The overall gross profit margin was 14.49% in a single quarter in 24Q3, up 3.82/0.8 pct year over year, respectively. The business direction was good for recovery.

The traditional business market is stable, and lithium iron shipments are high. The peak season of the car market's “Golden Nine Silver Ten” and the active global energy storage system stimulated demand for lithium iron phosphate. The company achieved sales of 0.1248 million tons of lithium iron cathode materials in the first three quarters of 24, up 77.65% year on year, corresponding to the expected shipment of 0.0503 million tons in the third quarter, an increase of 5% over the second quarter. It is estimated that Q3 loss per ton was about 2,300 yuan, a contraction of about 500 yuan compared to the second quarter. This is mainly due to profit recovery brought about by high capacity utilization. In terms of traditional main business, the company achieved sales volume of 2.91/0.2428/0.0763/0.0128 million tons in the first three quarters, respectively, with year-on-year changes of +0.2%/-5.32%/12.60%/20.55%, achieving sales revenue of 5.32/0.443/0.372/0.051 billion yuan, with year-on-year changes of +3.01%/-8.16%/12.12%/11.57%, respectively. Overall performance is steady and progressing.

H shares were successfully listed, injecting vitality into the overseas market to accelerate. On October 30, 2024, 0.1 billion H shares issued by the company were listed and traded on the main board of the Hong Kong Stock Exchange. Based on the H-share offering price of HK$5.5 per share, after deducting underwriting commissions and other estimated expenses related to the global offering, and assuming that the over-allotment rights are not exercised, the net amount of proceeds from the global sale is estimated to be approximately HK$0.495 billion. The capital raised will mainly be used for the construction costs of the second phase of the Indonesian plant and the new lithium iron phosphate production line at the Xiangyang plant, and flexible multi-channel financing Help the company optimize its balance and liability structure and support subsequent continuous capacity expansion and business development. Compared with the domestic market, which has a high internal volume, all aspects of lithium batteries are currently still in short supply overseas. The company focuses on the strength of the overseas lithium iron market, seizes the opportunity for overseas battery manufacturers to switch to lithium iron, and is expected to enjoy the first-mover advantage of overseas production capacity.

Investment advice: The company is expected to achieve operating income of 8.014, 11.241, 15.576 billion yuan in 2024-2026, and net profit of 0.406, 0.391, and 0.619 billion yuan, with year-on-year increases of 67.1%, 196.3%, and 58.2%. The corresponding EPS is -0.61, 0.59, and 0.93 yuan, respectively. The corresponding PE multiples for 2025-2026 are 18.4X and 11.6X. The company takes the lead in overseas production capacity construction, and is deeply tied to leading customers to improve the certainty of capacity absorption. Increased concentration and improved industry sentiment are expected to bring impressive performance flexibility and maintain a “buy” rating.

Risk warning: shortage of raw materials and risk of price fluctuations; new business market expansion falls short of expectations; production capacity expansion falls short of expectations; overseas situation risk and exchange risk, etc.