2025-06-09 01:42Investment Rating - The investment rating for the lithium sector has been adjusted to a pecking order of steel > aluminum > lithium > copper > gold > battery > thermal coal > cement [1] Core Insights - The national "trade-in" subsidy for new energy vehicles (NEVs) has been suspended in some provinces earlier than expected, which may exert downward pressure on NEV demand, but the impact is estimated to be limited due to OEMs offering price discounts and diminishing marginal impact of subsidies [1] - Supply side dynamics are critical, with expectations of more supply cuts for lithium compounds sourced from spodumene and lepidolite in the next three months, as current prices are testing the cost curve for most lithium producers [1] - The market is expected to experience lingering pressure over the next 12 months due to significant oversupply this year [1] Summary by Sections Lithium Market Overview - As of June 5, 2025, the average selling prices (ASP) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) are Rmb60.2k/t and Rmb62.3k/t respectively, showing a decline from the previous week [2] - China's Li2CO3 production increased by 5% week-over-week to 17,471 tons, with production from brine, lepidolite, and spodumene showing varied changes [2] - Total inventory of Li2CO3 reached 132,432 tons, reflecting a 1% increase week-over-week, with downstream players' inventory decreasing slightly [2] Company Valuations - Aluminum Corporation of China (Chalco) has a target price of HK$7.60 per share based on a price-to-book (P/B) ratio of 1.59x for 2025E, reflecting stronger than historical average returns due to higher aluminum margins [18] - Tianqi Lithium's A-share target price is set at Rmb26.26 per share based on a P/B multiple of 1.0x for 2025E, which is approximately 1.2x standard deviation below the historical average [22] - The target price for Tianqi Lithium's H-shares is HK$23.0, applying a 30% discount to the A-share target P/B, consistent with historical averages [24]