GANFENG LITHIUM(002460)：IMPAIRMENT AND FAIR VALUE LOSSES WEIGH ON EARNINGS;EXPLOITATION OF SELF-OWNED MINES WELL ON TRACK

　　2024 results miss our expectations
　　Ganfeng Lithium announced its 2024 results: Revenue fell 42.7% YoY to Rmb18.91bn, and net profit attributable to shareholders turned negative YoY to -Rmb2.07bn. In 4Q24, revenue fell 31.7% YoY but rose 14.9% QoQ to Rmb4.98bn, and net profit attributable to shareholders was -Rmb1.43bn. The firm’s results missed our expectations.
　　First, the lithium sector’s gross profit contribution declined due to rising sales volume and falling prices. According to Asian Metal, theaverage price of battery-grade lithium carbonate declined 64% YoY to about Rmb90,206/t in 2024, while the firm’s sales volume of lithium products rose 27% YoY to 0.13mnt, leading to a decline in revenue. We estimate that the firm’s cost of lithium salts fell 61% YoY to about Rmb82,929/t in 2024, implying a decline in gross profit contribution from the lithium segment due to a sharper decline in prices than in costs.
　　Second, asset impairment and fair value losses weighed on earnings.
　　In 2024, the firm made provisions for asset impairment losses of Rmb0.42bn, mainly due to falling inventory value of lithium concentrates, lithium salts, and battery products. In addition, the firm’s losses from changes in fair value totaled Rmb1.48bn in 2024, mainly due to the falling share price of PLS.
　　Third, investment income turned negative in 4Q24 as a result of the impact of falling concentrate prices. In 4Q24, the firm’s equityinvestment income was -Rmb0.33bn, mainly due to the loss of investment income from the Mt Marion lithium mine caused by falling lithium concentrate prices and rising costs, implying weaker profit support from Australian mines’ equity amid low prices.
　　Trends to watch Development of self-owned mines well on track; projects in Africa and Argentina to be main growth drivers. We believe the firm’s projectsin Africa and Argentina will be the main sources of earnings growth in the future, and we expect its self-sufficiency rate of equity resources to rise from 30% in 2025 to 51% in 2028, with the capacity ramp-up of self-owned mines and progress in cost reduction and efficiency enhancement being key variables
　　1) The 506,000t/yr lithium concentrate phase I project of the Goulamina lithium mine in Mali has started operation, and the capacity of the second phase can be expanded to 1mnt/yr, providing the firm with a low-cost source of concentrate. 2) The capacity ramp-up of the Cauchari project in Argentina is progressing smoothly. The firm plans to add a 5,000t/yr LCE demonstration line based on the direct lithium extraction method to the phase I project, which may be applied in phase II of the project to further reduce production costs. 3) The 20,000t/yr lithium chloride production line of the Mariana project in Argentina started operation in February 2025, and we expect the firm to provide a steady supply of lithium chloride products starting from 2H25.
　　Financials and valuation
　　Due to falling average lithium prices, we lower our 2025 net profit forecast 74% to Rmb335mn and introduce our 2026 net profit forecast of Rmb1.93bn. A-shares are trading at 35.5x 2026e P/E and H-shares are trading at 20.1x 2026e P/E. As the firm’s self-sufficiency ratio of resources continues to rise, we maintain an OUTPERFORM rating and our target price, implying 40.2x 2026e P/E for A-shares with 13% upside, and 24.2x 2026e P/E for H-shares with 21% upside.
　　Risks
　　Sharper-than-expected decline in lithium salt prices; disappointing progress of resource projects; risks related to overseas resource projects.
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