The company achieved net profit of 0.01 billion yuan to mother in 2024H1, -97% YoY. In 2024H1, the company achieved revenue of 6.888 billion yuan, -47% year over year; realized net profit to mother of 0.01 billion yuan, -97% year over year; gross margin was 7.79%, -0.11pct year on year. In 2024Q2, the company achieved revenue of 3.196 billion yuan, -29% year over month; realized net profit of 0.048 billion yuan, -30% year over year, turning loss into profit month on month; gross margin was 10.84%, +4.46 pct year on year and +5.69 pct month on month.

The company's ternary cathode shipments continue to increase, and high nickel and ultra-high nickel products are leading the industry. 2024H1 holds the top position in the global ternary cathode market share of 11%. The company's 2024H1 ternary cathode sales reached 0.053 million tons, +17% year over year; of these, Q2 sales were 0.0265 million tons, +37% year over year, and basically flat month on month. Looking ahead, with the recovery in demand and the development of domestic and foreign customers, the company's shipments are expected to continue to grow. 2024H1's share of the domestic high nickel ternary market is nearly 40%, +5pct year on year. The company's 9 series ultra-high nickel products have achieved stable supply. 2024H1 shipments reached 0.012 million tons, accounting for nearly 25%.

The company's overseas base layout is progressing smoothly, and overseas customers are being developed one after another. In the Korean region, the first phase of the company's 0.02 million-ton ternary cathode project has been completed, and production is steadily increasing; the second phase of the 0.04 million-ton ternary cathode project is expected to be completed by the end of 2024. In the European region, the company completed the acquisition of the British Johnsonmatthey plant in Poland through investment and acquisition, and began construction of the first 0.02 million ton cathode project. In the US region, the company has completed the registration of a North American subsidiary, and the North American factory site selection is progressing steadily. 2024H1's overseas customer sales accounted for 17%, +16pct compared to the previous year. The company has signed memorandums of cooperation with world-renowned battery companies such as SK On, and the Korean cathode factory has passed many international customer audits.

Affected by the decline in overseas production capacity and high upfront investment in emerging businesses, the company's profits are under pressure in the short term. 2024H1's net profit was 0.023 billion yuan (not deducting minority shareholders' profit and loss data), of which the net profit of the ternary cathode business was nearly 0.12 billion yuan, and the net profit of strategic emerging businesses such as precursors, lithium manganese phosphate, and sodium electric materials was about -0.09 billion yuan. The company's first phase project in Korea is still in the process of climbing. The subsidiary JS Co., Ltd. achieved revenue of 0.124 billion yuan and net profit of -0.112 billion yuan in 2024H1. Looking ahead, the capacity utilization rate of the company's Korean factory is steadily increasing, and it is expected that it will gradually turn a loss into a profit. At the same time, electric models equipped with lithium manganese iron phosphate materials have been launched one after another, and the company's lithium manganese iron phosphate shipments are expected to grow rapidly, thereby boosting strategic emerging businesses to turn losses into profits.

Risk warning: Electric vehicle sales fall short of expectations; raw material prices fluctuate greatly; demand for three yuan falls short of expectations.

Investment advice: Lower profit forecasts and maintain the “better than the market” rating. Considering the slow growth rate of demand for ternary cathodes due to the slump in the share of ternary power batteries, and the short-term pressure on profits in the early stages of the company's new business and overseas factory development, we lowered our profit forecast. It is estimated that in 2024-2026, the company will achieve net profit of 0.204/0.493/0.681 billion yuan, -65/+142/ +38% year over year, EPS is 0.42/1.02/1.41 yuan, and dynamic PE is 54/22/16 times.