incident. On August 2, 2024, the company released its 2024 semi-annual report. The first half of the year achieved revenue of 6.3 billion yuan, a decrease of 22.43%, and realized net profit of 0.239 billion yuan, a decrease of 6.12%, after deducting net profit of 0.22 billion yuan.

Q2 Performance split. Revenue and net profit: The company's 2024Q2 revenue was 3.001 billion yuan, down 33.82%, down 9.02%; net profit to mother was 0.128 billion yuan, down 8.12%, up 14.84%; net profit after deducting back to mother was 0.117 billion yuan, down 9.00%, up 14.10%. Gross profit margin: 2024Q2 gross margin was 11.62%, up 3.74 pcts from the same period, and 4.02 pcts. Net interest rate: 2024Q2 net margin was 4.26%, up 1.19pcts from the same period, and 0.91 pcts. Expense rate: The company's expense ratio for the 2024Q2 period was 3.71%, 0.43pct year on year. Among them, sales, management, R&D, and finance expenses were 0.19%, 1.04%, 2.04%, and 0.45%, respectively, with year-on-year changes of 0.12pct, 0.43pct, -0.08pct, and -0.04pct.

Shipments of lithium battery cathode materials have increased, and profitability has improved markedly. In 2024 H1, the company shipped 0.045 million tons of lithium battery cathode materials, of which 0.018 million tons and 0.026 million tons of lithium cobalt oxide and ternary materials were shipped respectively, and Q2 shipped about 0.01 million tons of lithium cobalt oxide and ternary materials, +19.06% and -34.35%. Benefiting from the increase in the share of lithium cobalate shipments and the increase in Q2 utilization rate, the company's profitability improved markedly in 2024Q2. The gross profit margin and net margin achieved the same increase of 3.74 pcts and 1.19 pcts respectively.

The product matrix iterates and innovates, and actively lays out new application fields and cutting-edge technology. 1) Lithium cobalate: 4.53V lithium cobalate has begun to be shipped in small batches. The 4.55V lithium cobalate development progress is in line with customer needs, and the company is actively developing high-performance products for AI functions; 2) Ternary materials: The overall performance and quality of next-generation Ni6 series high-voltage materials are stable. High-nickel ternary materials have entered the mass production or certification stage, and newly developed ultra-high power materials have begun to be supplied stably. 3) Hydrogen energy materials: Vehicle alloys are currently in the pilot program discussion stage, and the development of low-cost alloys has entered the batch introduction stage. 4) New application fields and cutting-edge technology: The company is actively expanding the field of low altitude, robot applications and solid state hydrogen storage, while also focusing on laying out cutting-edge technologies such as lithium supplement materials and solid state battery cathode materials to enable future sustainable development.

The production capacity layout is progressing steadily, and preparations for the French joint venture project are going well. The company is steadily advancing various engineering construction projects, and production at the French base, Haijing base, Ningde base, Ya'an base and Fuquan base is progressing steadily.

Among them, preparations for the 0.04 million-ton ternary material project at the French base are progressing smoothly. The project was established as a joint venture between the company's holding subsidiary, European Xiamen Tungsten, and Orano CAM, a holding subsidiary of the French Orano Group. Europe's Xiamen Tungsten invested 10.2 million euros, with a shareholding ratio of 51%, and a total project investment of 3.16 billion yuan.

Investment advice: We expect the company to achieve revenue of 147.76, 170.51 and 20.854 billion yuan in 2024-2026, with year-on-year growth rates of -14.6%, 15.4% and 22.3% respectively; net profit to mother of 6.33, 7.11, and 921 million yuan, respectively, with year-on-year growth rates of 20.1%, 12.2% and 29.5%, respectively. On August 2, 2024, the corresponding PE price was 20, 18, and 14 times, respectively. Considering the company's obvious technical advantages, the future multi-curve business growth curve is clear, and the “recommended” rating is maintained.

Risk warning: The progress of new production capacity construction and commissioning falls short of expectations; industry competition increases the risk.