The company released three quarterly reports: revenue of 6.231 billion yuan in the first three quarters, or -35.79% year on year; realized net profit to mother of 0.971 billion yuan, -68.19% year over year. The company achieved revenue of 1.739 billion yuan in 24Q3, -20.69% month-on-month in Q3; realized net profit of 0.202 billion yuan to mother, and -32.58% month-on-month in Q3. Q3 profit declined month-on-month. On the one hand, due to the continued decline in lithium prices, the average price of domestic battery-grade lithium carbonate 24Q2/Q3 was 0.1052/0.0794 million yuan/ton respectively, and Q3 was -24.52% month-on-month. On the other hand, when downstream demand was relatively lackluster, the company paid more attention to improving product quality and did not pursue quantitative release.

Cost reduction and efficiency in the lithium business: Faced with the adverse effects of the sharp drop in lithium prices, the company adheres to the sales strategy of “terminal leader, high-quality cathode, and characteristic segment” as the main customer and the business policy of “long-term cooperation as the main focus, exhaustive sales” to ensure the steady operation of the lithium business. Furthermore, the company optimizes the entire industry chain, reduces production costs, and enhances product competitiveness. In the first half of this year, the company's operating cost per ton of lithium carbonate was only 0.05 million yuan, a year-on-year cost reduction of more than 10%. It is expected that in the second half of the year, as cost reduction and efficiency increases continue to advance and the prices of some raw materials drop, the company's cost per ton of lithium carbonate will be further optimized.

Key project aspects: Huaqiao Mining, a holding subsidiary of the company, completed the mining license change registration. The certified production scale was changed from 3 million tons/year to 9 million tons/year. It is currently carrying out work related to production safety licenses and mine renovation and expansion projects, which are expected to be implemented next year; Yongxing New Energy invests in the construction of a lithium mica green, intelligent and efficient lithium extraction comprehensive technical improvement project. It is expected that project construction will begin within the year; Yongcheng Lithium 3 million tons/year lithium ore efficient mineral processing and integration The construction of the utilization project has basically been completed, and the equipment installation stage has begun. In addition, an ore raw material transportation project is also underway.

The special steel business is rising steadily: against the backdrop of a recovery in demand for energy steel, the company adjusted the product structure in a timely manner, optimized the product ratio, and the gross profit per ton of steel increased significantly. In 2023, the company's products with a gross profit of more than 2,000 yuan/ton per ton of steel accounted for more than 40% of sales. The company's gross profit per ton of steel is expected to remain at a high level in the first three quarters of this year.

Risk warning: Project construction progress falls short of expectations; product price fluctuations exceed expectations.

Investment advice: Maintain an “better than the market” rating.

In view of further adjustments in lithium prices, the company's profit forecast was revised down. The company's revenue for 2024-2026 is estimated to be 82.11/91.20/100.27 billion yuan (original forecast 89.82/96.51/106.24) billion yuan respectively, with year-on-year growth rates of -32.6%/11.1%/9.9%, respectively; net profit to mother is 11.63/12.80/15.95 (original forecast 13.67/15.33/19.05) billion yuan, respectively, with year-on-year growth rates of -65.9%/10.1%/24.6%; diluted EPS was 2.16/2.38/2.96 yuan, respectively. The current stock price corresponds to PE 18/16/13X. Considering the company's outstanding resource advantages and clear growth path, the lithium business has achieved remarkable results in cost reduction and efficiency. It can effectively cope with the adverse effects of falling lithium prices and maintain a “superior to the market” rating.