China Battery Materials_ Lithium into 1st week of Feb - Downstream extended the resilience albeit inched down during CNY

Summary of China Battery Materials Conference Call Industry Overview - The report focuses on the China Battery Materials industry, particularly lithium production and pricing trends as of February 2025. Key Points Lithium Production and Demand - Production Trends: The production pipeline for the top five battery makers in January 2025 was flat month-over-month (MoM) compared to December 2024, but up 89% year-over-year (YoY). In February 2025, production slightly decreased by 4% MoM but showed resilience with a 119% YoY increase, contrasting with a 17% MoM decline in February 2024 [1][2]. - Production Cuts: February's lithium production cut is expected to narrow to -2% MoM, compared to -12% MoM in January 2025 [1]. Pricing Trends - Average Selling Prices (ASP): Lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) ASPs were reported at Rmb77.3k/t and Rmb70.6k/t respectively as of February 6, 2025, showing little change from Rmb77.9k/t and Rmb70.6k/t on January 23, 2025 [2]. Inventory Levels - Inventory Status: Total inventory of Li2CO3 was 107,686 tons, down 1% WoW. Downstream players' inventory decreased by 16%, while smelters and others saw increases of 14% and 2% respectively [2]. Company Insights Top Picks - Recommended Companies: The report highlights CATL, Hunan Yuneng, and Shenzhen Kedali as top picks for investment in the battery materials sector [1]. Valuation and Risks - CATL: Valued at Rmb362/share based on a 17.0x 2024E EV/EBITDA. Risks include lower-than-expected electric vehicle (EV) demand and increased competition [9][10]. - Hunan Yuneng: Valued at Rmb66.3/share using a 13.3x 2025E EV/EBITDA. Risks involve lower LFP cathode shipments and higher expenses [11][12]. - Shenzhen Kedali: Valued at Rmb92.03/share based on a 15x 2025E P/E multiple, reflecting a cautious outlook due to demand slowdown and policy headwinds. Risks include slower battery demand and rising raw material costs [13][14]. Additional Insights - Market Resilience: Despite production cuts during the Chinese New Year (CNY), the demand for lithium remains resilient, indicating a potential recovery in the market [1]. - Competitive Landscape: The competitive environment is expected to improve in 2025, which may benefit companies like Hunan Yuneng [12]. This summary encapsulates the critical insights from the conference call regarding the lithium market and the performance outlook for key companies in the battery materials sector.