HTSC·2025-04-30 08:09Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 20.53 and RMB 34.35, maintaining the "Buy" rating [7][8]. Core Views - The company reported Q1 2025 revenue of RMB 3.772 billion, a year-over-year decrease of 25.43% and a quarter-over-quarter decrease of 24.28%. The net profit attributable to the parent company was -RMB 356 million, showing an improvement from -RMB 1.434 billion in Q4 2024, with a year-over-year increase of 18.93% and a quarter-over-quarter increase of 75.18%. The company is expected to gain significant earnings elasticity when the industry recovers due to its ongoing expansion in upstream quality resources and midstream smelting capacity [1][4]. Summary by Sections Financial Performance - The company's Q1 2025 gross margin was 12.95%, an increase of 0.81 percentage points quarter-over-quarter. The average spot price of lithium carbonate was RMB 75,800 per ton, unchanged quarter-over-quarter, while the average price of spodumene (CIF) increased by 5.8% to USD 834.4 per ton. The cost of the Mt Marion mine, in which the company holds a 50% stake, decreased significantly by 34.2% quarter-over-quarter, supporting the recovery of the company's gross margin [2][3]. Cost and Pricing Outlook - The cost of lithium mining continues to decline, with the FOB costs for Mt Marion and Wodgina mines dropping by 34.2% and 23.5% respectively in Q1 2025. This trend indicates potential further decreases in lithium prices, which may remain under pressure due to a long-term oversupply in the market. The cost reductions at Mt Marion are beneficial for the company's mining profitability and may provide some support for its performance [3][4]. Profit Forecast and Valuation - The profit forecast for the company has been adjusted downward due to the declining cost curve in the lithium industry. The projected net profits for 2025-2027 are RMB 514 million, RMB 1.539 billion, and RMB 3.339 billion, respectively, with corresponding EPS of RMB 0.25, RMB 0.76, and RMB 1.66. The expected BPS for the same period is RMB 20.82, RMB 21.43, and RMB 22.94. The company is assigned a 2025 PB of 1.65 times, with a target price based on the April 29, 2025 exchange rate [4][6].