Matters:

Xiamen Tungsten Xinneng released its 2024 semi-annual report: the company's 2024 H1 revenue was 6.3 billion, -22.43%; net profit to mother was 0.239 billion, -6.12% year over year; net profit after deducted from mother was 0.22 billion yuan, -3.24% year over year.

Of these, 24Q2 achieved revenue of 3.001 billion, -9.02% month-on-month; net profit to mother 0.128 billion, +14.84% month-on-month; net profit after deducting non-return to mother 0.117 billion, +14.1% month-on-month.

Commentary:

Sales of lithium battery cathode materials have increased, strengthening the leading position. The company sold 0.045 million tons of lithium battery cathode material products in the first half of the year. With the continuous release of 4.5V high-voltage products, lithium cobalate achieved sales volume of 0.018 million tons, an increase of 29.98% over the previous year, and the leading position of lithium cobalate was stable. With the technical advantages of high voltage and high power, ternary materials achieved sales volume of 0.026 million tons, an increase of 108.59% year on year; sales volume of hydrogen storage alloys was 0.002 million tons, an increase of 7.53% year on year.

Steadily advance the engineering construction of various projects and achieve an industrialized layout. In order to meet the precursor requirements for new French tungsten materials, the 0.04 million-ton ternary material project in France was jointly funded by the company's subsidiary European Xiamen Tungsten and Orano CAM, and preliminary preparations were carried out smoothly. The Haijing base's 0.03 million-ton lithium-ion battery material expansion project has now completed the main structure capped and equipment purchase has begun; the first phase of the Ya'an base liquid phase lithium iron phosphate project has completed plant construction and entered the commissioning stage; the 0.07 million-ton lithium-ion battery cathode materials at the Ningde base and the 0.04 million-ton three-precursor project with an annual output of 0.04 million tons at Fuquan base are progressing steadily.

Optimize product application areas and actively deploy cutting-edge technology. The company's 4.53V lithium cobalate has been certified by multiple terminal projects and shipped in small batches; the 4.55V lithium cobalate development progress meets customer needs. In terms of ternary materials, the new generation of Ni6 series high-voltage materials have stable performance and are expected to be mass-produced in the second half of the year; high-nickel ternary materials will enter mass production or certification in several overseas projects; and ultra-high power materials will enter mass production and begin stable supply. Vehicle alloys are currently in the pilot program discussion stage, and the development of low-cost alloys has entered the batch introduction stage. The company is actively expanding low-altitude fields such as drones, developing high-energy density lithium cobalate and cost-effective ternary materials in robotics applications, and iteratively upgrading products for solid-state hydrogen storage. At the same time, cutting-edge technologies such as lithium supplement materials, sodium electrodes, and solid-state battery cathodes are deployed, and future application prospects are broad.

Investment advice: With the release of production capacity at overseas bases and the recovery in consumer battery demand, the company will continue to grow rapidly in the next few years. However, the prices of raw materials and the company's finished products fell rapidly, affecting the company's profit level. We adjusted the company's 2024-2026 net profit forecast to be 0.551/0.679/0.774 billion yuan (the original value of 1.122/1.412 billion yuan in 24/25), respectively. The current market value corresponding to PE is 22/18/16 times, respectively. Considering that the company's lithium cobalate and high-voltage ternary materials are in a leading position in the industry, various fields such as hydrogen energy and low altitude are also making simultaneous efforts, giving 22xPE in 2025, corresponding to a target price of 35.53 yuan, maintaining a “strong push” rating.

Risk warning: Sales of cathode materials fall short of expectations, fluctuating raw material prices, increased market competition, insufficient capacity utilization, etc.