Key points of investment

The performance was in line with expectations. The company's 24H1 revenue was 9.59 billion yuan, or -47.2%, net profit to mother -0.76 billion yuan, or -113%; of these, 24Q2 revenue was 4.53 billion yuan, -48%/-10.4% YoY, net profit to mother -0.32 billion yuan, -109.3%/+26.8% YoY, after deducting 0.09 billion yuan of non-net profit, -95%/+137% YoY, and Pilbara shares of financial assets not mainly held by the financial assets of the financial asset Pilbara fell , resulting loss from changes in fair value, gross profit margin of 15.9%, +9.3/+9.8pct compared to the same period last month. The company previously predicted a net profit loss of 0.76-1.25 billion yuan for 24H1. The performance was at the upper limit of the forecast, which was in line with expectations.

Q2 Lithium salt shipments increased slightly month-on-month, and profits were pressured in the first half of the year due to high-priced concentrate inventories. We expect 24H1 to ship 0.06 million tons+ of lithium salt, with Q2 shipping 0.03 million tons+, a slight increase over the previous month; we expect total lithium salt sales to reach 0.12 million tons in 24, an increase of 15% +. The increase mainly comes from lithium carbonate produced in salt lakes in South America. In terms of price cost, the average price of 24H1 lithium salt is about 0.105-0.11 million yuan/ton, and the average cost is about 0.09-0.095 million/ton, corresponding to the average price of lithium concentrate about 1,300 US dollars; we expect the price of lithium salt to remain in the 0.07-0.09 million yuan range in the second half of the year, and the average price of concentrate is about 800 US dollars, corresponding to the cost of lithium salt about 0.066 million/ton.

Continue to lay out high-quality lithium resources to improve the mine side's self-supply rate. We expect our own mineral equity production to be around 0.05-0.07 million tons in 24, with a self-supply ratio of around 50%. 1) The Marion project 24H1 concentrate produced 0.36 million tons, shipped 0.34 million tons (SC6 0.24 million tons), and the company holds 50% of the shares. We expect equity production of about 0.03 million tons of LCE in 2024; according to SC6, 24H1 sales price 0.007 million yuan (960 US dollars), operating cost per ton 0.0054 million yuan (750 US dollars), profit per ton of concentrate 0.0012 Million yuan, corresponding to 24H1 net profit of 0.3 billion yuan, contributed 0.15 billion yuan to investment income. 2) The Goulamina spodumene project in Mali in Africa plans the first phase of the concentrate with a production capacity of 0.506 million tons. The flotation production line is being completed, and the crushing production line has already started. It is expected that the first batch of spodumene products will be produced within 24 years. The company has increased its shareholding in Malilithium. Currently, it holds 60% of the shares and has obtained control. 3) The first phase of the Cauchari-Olaroz project in Argentina plans to produce 0.04 million tons of LCE per year. Currently, the output has climbed to about 70% of the design capacity. It is planned to complete the production of 0.02-0.025 million tons of lithium carbonate products in 2024. The company has 76% underwriting rights, holds 47% of the shares, and is expected to contribute 0.009-0.012 million tons of equity output in 24.

4) Mariana Salt Lake in Argentina plans to test production by the end of 2024.

Q2 Operating cash flow improved markedly, and inventory increased compared to the end of Q1. The company 24H1 was affected by the fall in Pilbara's stock price and lost 0.87 billion yuan due to changes in fair value. The cost rate for the 24H1 period was 17.6%, up 10.4pct, of which the Q2 cost ratio was 20.2%, +13.3/+4.9pct; 24H1 net operating cash flow of 3.94 billion yuan, up 246.5%, of which Q2 was 3.82 billion yuan, +700%/+3117% year on month; 24H1 capital expenditure was 4.55 billion yuan, or -13.8%, of which Q2 was 3.6 billion yuan, +1.1 percent year over month 275.8%; inventory at the end of 24Q2 was 8.12 billion yuan, up 16.6% from the end of Q1.

Profit forecast and investment rating: It is expected that lithium prices will continue to be in the bottom range. We lowered our 2024-2026 profit forecast. We expect the company's net profit to be 0.62/1.23/1.8 billion yuan in 2024-2026 (the original forecast was 3.02/4/4.81 billion yuan for 24-26), -113%/+298%/+46%, corresponding to 42x/29xPE in 25-26. Due to the company's global layout of many high-quality lithium resources, the mine side's self-supply ratio will continue to increase and maintain” “Buy” rating.

Risk warning: Production capacity release falls short of expectations, demand falls short of expectations.