Tianqi Lithium: Benefiting from the strong industry momentum, capacity expansion drives impressive performance

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Tianqi Lithium: Benefiting from the strong performance of the industry, it has seen impressive results as it expands its production capacity. Tianqi Lithium (002466, stock forum): On August 22, the company released its interim financial report, showing that it generated revenue of 1.706 billion yuan in the first half of 2016, a 125.71% increase compared to the same period the previous year. By Han Jin, special contributor to Red Weekly (Blog, Weibo)； The net profit attributable to the owners of the parent company was approximately 747 million yuan, representing a growth of 1722.50% compared with the same period last year ； The basic earnings per share was 0.7587 yuan, representing a increase of 1,719.42% compared to the same period last year. Thanks to its strong operational performance, the company expects to achieve a net profit of between 1.114 billion yuan and 1.174 billion yuan for the period from January to September, representing a year-on-year increase of 1718.07% to 1816.00%. The report shows that the external business environment for Tianqi Lithium is improving continuously. With the implementation of initiatives such as \"Made in China 2025\" and various supporting policies, there is a growing demand for lithium batteries in China’s new energy vehicles and energy storage systems. Coupled with the steady increase in demand in the traditional lithium battery market, the industry related to battery materials, which lies at the upstream stage of lithium battery production, will continue to develop rapidly, thereby driving a corresponding rapid increase in demand for lithium ore and lithium-based chemical products. Thanks to the continued strong performance of the lithium industry, Tianqi Lithium Co., Ltd. recorded a net cash flow from operating activities of 912 million yuan, representing a year-on-year increase of 175.34%; its cash flow indicators are therefore in very good condition. Since the beginning of this year, Tianqi Lithium’s sales volume and prices for lithium products have both increased, and the proportion of revenue generated from lithium-related chemical products has also risen significantly. The gross profit margin of the company’s lithium mining business reached 60.82%, an increase of 3.87% compared to the same period last year; the gross profit margin for lithium compounds and derivatives was 76.97%, with a rise of 42.93% on a year-on-year basis. In addition, the company has made efforts to reduce costs, increase profit margins, and improve operational efficiency; both administrative expenses and financial expenses declined on a year-on-year basis. The overall gross profit margin for its products rose to 72.38%, an increase of 25.02 percentage points compared to the previous year, reaching the highest level since 2015. As a key supplier of battery-grade lithium carbonate in China and a contributor to the establishment of industry standards for this material, Tianqi Lithium has, in recent years, pursued vertical resource expansion and horizontal industrial mergers and acquisitions. At the same time, it has continued to focus on cutting-edge industry technologies, striving to maximize the production capacity of its existing facilities. It has also accelerated the independent research, development, and adoption of new technologies, equipment, and processes. As a result, the company has shifted from merely engaging in lithium processing and manufacturing to a business model that includes lithium resource storage, development, and trading, as well as the processing of lithium-based products, thereby further strengthening its core competitiveness. Tianqi Lithium actively promotes technological innovation. The technology for extracting lithium from ore has become increasingly sophisticated over 20 years of improvement and development. By introducing, assimilating, and adopting the latest process technologies and concepts from around the world, the company has further strengthened its technical leadership in the global industry of lithium extraction from ore. To date, the company and its wholly-owned subsidiaries have obtained a total of 73 patents, with all lithium products covered by invention patents; one of these patents has been awarded the **Invention Patent Gold Award**. The company’s trademark was awarded the title of “Famous Trademark in China”, and the company’s wholly-owned subsidiary, Chengdu Tianqi, was honored as a “Key New Material Enterprise in Chengdu”. The company has successively obtained certifications for the ISO9001 quality management system, ISO14001 environmental management system, and GB/T28000 occupational health and safety management system. Currently, Shenghe Lithium, a wholly-owned subsidiary of Tianqi Lithium, holds the mining rights for the Cuola spodumene mine in Yajiang County, Ganzi Prefecture, Sichuan Province. The identified resource reserves in this mine area (including proven, indicated, and inferred economic resources) amount to 19.714 million tons of ore, along with 255,744 tons of lithium oxide, giving an average lithium oxide content of 1.3%. Wenfield, a subsidiary controlled by the company, owns the Greenbush spodumene mine in Western Australia. According to the technical report prepared by Berrydobbell Australia Pty Ltd, as of September 30, 2012, the total resources of the Greenbush lithium mine amounted to 120.6 million tons, equivalent to 7.24 million tons of lithium carbonate ； The total lithium ore reserves amount to 61.5 million tons, with an average lithium oxide content of 2.8%, which is equivalent to 4.3 million tons of lithium carbonate. In addition, the company’s subsidiary, Shigatse Zabuye, owns the Zabuye salt lake, which is a lithium-rich carbonate salt lake. The lithium reserves in this lake amount to 1.83 million tons (in terms of lithium carbonate), with a magnesium-to-lithium ratio of 0.02. It represents one of the best-litiated salt lakes in China in terms of resource quality. The company thus has a complete resource portfolio and a solid foundation for development. In addition to possessing abundant and high-quality lithium concentrate resources, Tianqi Lithium and its wholly-owned subsidiaries have a processing capacity of over 30,000 tons for lithium salt products, enabling them to become a key supplier of core raw materials for the lithium-ion new energy industry – one that integrates upstream resource reserves and development with midstream processing of lithium products. It currently has two lithium product production bases in Shehong, Sichuan, and Zhangjiagang, Jiangsu. The total production capacity of the Shehong facility in Sichuan is 17,200 tons, of which 10,500 tons are for lithium carbonate, 5,000 tons per year for lithium hydroxide, 1,500 tons per year for anhydrous lithium chloride, and 200 tons per year for metallic lithium ； The production capacity of the base in Zhangjiagang, Jiangsu, is designed to be 17,000 tons; through technical upgrades, it is now possible to achieve a production target of 1,200 tons per month. As new energy vehicles gain popularity, and the energy storage sector is expected to become a new source of demand for lithium batteries, the demand for lithium carbonate will remain strong. The further expansion of Tianqi Lithium’s production capacity is likely to continue to boost its performance. In addition, the company has begun feasibility studies for the first phase of the \"20,000 tons per year of battery-grade lithium hydroxide\" project, which is expected to become a new source of profit growth in the future. (Responsible Editor: Ma Jun HN022)