Description of the event

Rongbai Technology released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 11.323 billion yuan, a year-on-year decrease of 39.04%; realized net profit of 0.116 billion yuan, a year-on-year decrease of 81.1%; and realized deduction of 0.089 billion yuan in non-net profit, a year-on-year decrease of 84.14%.

2024Q3 achieved revenue of 4.436 billion yuan, down 21.91% year on year and up 38.79% month on month; realized net profit of 0.106 billion yuan, down 55.15% year on year, up 123.31% month on month; deducted non-net profit of 0.093 billion yuan, up 168.02% month on month.

Incident comments

On the revenue side, the company's three-yuan cathode and precursor shipments are expected to increase significantly month-on-month in 2024Q3, mainly due to overseas customer expansion exceeding expectations, and the progress of the Korean base accelerated. In terms of profit, the overall gross margin of Q3 was 11.15%, and continued to increase month-on-month; looking at the single cathode business, it is expected that Q3's single-ton non-profit will increase significantly compared to Q2. At the same time, considering asset impairment and losses in precursor, manganese, iron, lithium, etc., it is estimated that the operating net profit of a single ton of yuan cathode increased significantly month-on-month. On the one hand, the share of overseas customers increased month-on-month, and high overseas premiums drive profitability.

In terms of other financial indicators, the 2024Q3 cost rate was 6.69%, of which the R&D cost rate was 3.01%, an increase of 0.14 pct over the previous year, and an increase of 1.23 pct over the previous year, mainly due to increased investment in R&D of all-solid-state batteries, sodium iron sulfate cathode materials, and medium-nickel high-voltage single crystals. In addition, 2024Q3 accrued asset impairment losses of 0.054 billion yuan, mainly due to inventory price depreciation and credit impairment rushing back 0.005 billion yuan. The final net interest rate was 2.39%, which continued to improve from month to month.

Looking ahead to Q4 and next year, it is expected that the company will continue to maintain a strong shipping trend in Q4, overseas customers will continue to increase, and production at the Korean base will continue to increase, and the proportion corresponding to overseas customers will remain around 20%. Looking ahead to 2025, the annual shipping growth rate is expected to reach more than 20%, the share of overseas customers is expected to rise to about 30%, and the long-term overseas customer share target will increase to 50%; in terms of profit, there is currently a premium for the three yuan products from overseas customers, and the first phase of production capacity at the company's Korean base is expected to be fully produced. Additional production capacity will gradually be released, and the increase in the share of overseas customers will drive a steady upward trend in profits. In addition to three yuan, new-generation sodium cathode and solid-state battery cathode companies are all actively deploying, and all categories of cathodes help the company open up new growth poles for profits. It continues to be recommended as a profit flexibility target for the overseas supply chain of lithium battery materials.

Risk warning

1. Demand for new energy vehicles and energy storage terminals falls short of expectations;

2. Competition in the industrial chain has intensified.