Net profit to mother was achieved in 24Q1 - 3.9 billion yuan, which is in line with market expectations. Q1 revenue in '24 was 2.59 billion yuan, down 77%, 64%, net profit to mother, 180%, 386%, net profit to mother of 3.90 billion yuan, deducted from non-net profit of 3.92 billion yuan, 181%, 384%, gross profit margin 48%, 41 pct, 29pct, net interest rate to mother -151 percent, 193pct, and 139pct. This was mainly affected by high-priced concentrate stocks and SQM tax disputes. The company previously predicted net profit of 43 to 3.6 billion yuan for 24Q1, which is in the median forecast, in line with market expectations.
Greenbush: Q1 concentrate sales fell 34%, and prices dropped sharply. On the sales side, Q1 Greenbush concentrate produced 280,000 tons, a decrease of 22%, and sales of 180,000 tons, a decrease of 34%. In terms of profit, Q1 concentrate revenue was 1.35 billion yuan, with an average price of 0.75 million yuan (1,034 US dollars) without tax, a decrease of 70%, a unit cash cost of 0.18 million yuan (250 US dollars), an increase of 8%, mainly due to a decrease in production. Unit operating costs (including royalties) were 0.21 million yuan, a decrease of 26%; Tianqi Q1 sold 140,000 tons of lithium concentrate, and we expect to contribute about 250 million yuan to the mother's profit.
High minority shareholders' equity in Q1 affected profits, and the impact of high-priced inventories gradually weakened from Q2. On the sales side, 24Q1 sold nearly 17,000 tons of lithium salt, an increase of 109%, an increase of 20%. Sales are expected to reach 70,000 to 80,000 tons in 24, an increase of 25%-30%. On the profit side, the company's consolidated statement at the end of '23 had 400,000 tons of lithium concentrate inventory, of which the company's main body had an inventory of about 200,000 tons, and the overall cost was high. The Q1 self-supply concentrate cost was calculated by the moving weighted average method. The company expected the average price of 3,000-3700 US dollars/ton, corresponding to the total cost of lithium carbonate 200,000 to 240,000 yuan. We expect the average price of lithium salt sales in Q1 to be around 100,000 yuan, corresponding to a loss of about 150,000 yuan per ton of lithium salt products, and a total loss of about 2.5 billion yuan in Q1. The company absorbed about 140,000 tons of concentrate stocks in Q1. We expect the remaining domestic inventory of high-priced concentrates to be about 60,000 tons at the end of Q1. In Q2, the smelting side is expected to drastically reduce losses as new ore storage costs are diluted.
The SQM tax dispute ruling affected investment income of 1.7 billion dollars, covering the historical dispute tax year, and the subsequent impact is expected to be small. The major associated company SQM is expected to reduce its 24Q1 net profit by about 1.1 billion US dollars due to tax litigation rulings. The company holds 22% of the shares, affecting profits of about 1.7 billion yuan.
The $1.1 billion covered all disputed mining tax expenses from 2011-2023, and SQM has already paid $900 million+, which is expected to have little impact on the company's cash flow and dividends.
Q1 Expenses increased significantly from month to month, and inventory decreased compared to the beginning of the year. 24Q1 investment income - 1.3 billion yuan, a decrease of 143%; the cost ratio for the 24Q1 period was 15.0%, an increase of 14.6 pct, and an increase of 11.6 pct, of which the management cost ratio was 4.7%, the environment increased 3.1 pct, the financial cost ratio was 9.8%, and the quarter increased 8.3 pct. Inventory at the end of Q1 was 2,994 billion yuan, a decrease of 5.0% from the beginning of the year; asset impairment losses of 60 million yuan were calculated in Q1, mainly due to depreciation of the inventory of the Quinana plant. Net cash flow from Q1 operating activities was $3.14 billion, a decrease of 36% and a decrease of 19%; Q1 capital expenditure was 1.27 billion yuan, up 76% from the same period, a decrease of 21%.
Profit forecast and investment rating: Due to the large impact of high-priced concentrate inventories in the first half of '24, we lowered our profit forecast for 2024 and raised our profit forecast for 2025-2026. We expect the company's net profit to be 0.1/44.7/5.06 billion yuan in 2024-2026 (originally estimated to be 35.7/42.6/4.87 billion yuan), -100%/+57212%/+13%, corresponding to 8577x/15x/13x PE in 24-26, maintaining the “buy” rating.
Risk warning: Production capacity release falls short of expectations, demand falls short of expectations.