- REITERATE Buy Entry – 130 Target – 150 Stop Loss – 120
- GANFENG LITHIUM CO., LTD. is a China-based company principally engaged in the research, development, production and sales of deeply processed lithium products. The company’s main products include lithium compounds, lithium metal and lithium batteries. The company’s products are mainly used in electrical vehicles, chemicals and pharmaceuticals. The company distributes its products in the domestic market and to overseas markets.
- Stellar 1H21 results. Revenue reached a record high of RMB4.0bn, an increase of 69.5% YoY primarily due to the increase in the unit selling prices and sales volume. Gross profit jumped by 204.3% YoY to RMB1.4bn. Gross margin was 34.9%, an increase of 15.4ppts YoY. Profit for the period attributable to owners of the parent was RMB1.4bn, an increase of 797.4% YoY.
- Price correction. The recent price drawdown was due mainly to the China-based battery-producer CATL acquiring Canada-based Millennial Lithium, topping an offer by Ganfeng Lithium of C$3.60/share. Millennial terminated the Ganfeng arrangement agreement in accordance with its terms and entered into the CATL arrangement agreement.
- Mark-up of selling prices. The company decided to raise the litimum product selling prices by RMB10,000/tonne and butyllithium products by 10% as a result of rising raw material prices and shortage of power supply, which resulted in higher production costs. The mark-up of prices will start from 10th October and last for one month.
- Consensus estimates per the 12-month target price is at HK$203.83, implying a 39.5% upside potential. EPS is forecasted to grow at 169.2%/49.8%/17.3% for FY2021/22/23F, which would bring forward P/Es down to 54x/36x/31x FY2021/22/23F.