Produced by Radar Finance and Economics, edited by Meng Shuai, Deep Sea
Tianqi Lithium's latest performance forecast unveiled the scars of its huge loss in the first quarter. In the first quarter of this year, Tianqi Lithium expects a net profit loss attributable to shareholders of listed companies of 3.6 billion yuan to 4.3 billion yuan.
Compared with the profit level of 4.875 billion yuan in the first quarter of last year, and even the loss scale of 801 million yuan in the fourth quarter of last year, this figure is particularly eye-catching. The news of Tianqi Lithium's huge loss in the first quarter was quickly transmitted to the capital side. On April 24, Tianqi Lithium's A-share share price fell 9.99%, and its market value evaporated by 7.4 billion yuan.
For the huge loss of more than 3.6 billion yuan in the first quarter, Tianqi Lithium gave two main reasons. On the one hand, the sharp decline in the price of lithium products led to a significant decline in the gross profit of the company's lithium products, and on the other hand, the tax litigation of the associate company SQM had a negative impact on the company's performance.
Radar Finance noticed that in fact, Tianqi Lithium's performance last year was not very impressive, with a revenue of 40.5 billion yuan that year only increased slightly by 0.13%, and the net profit attributable to the parent company of 7.297 billion yuan fell by 69.75% year-on-year. Behind the decline in the company's performance last year, it is mainly related to the decline in lithium prices and the decrease in investment income.
As the helmsman of Tianqi Lithium, Jiang Weiping entered the lithium resource industry earlier with his forward-looking vision, and established Tianqi Lithium's leading position in the industry through big bets. With Tianqi Lithium, Jiang Weiping, who has nearly 20 years of experience in the lithium industry, has successfully staged his own wealth myth.
In the 2021 "Hurun Report", Jiang Weiping's wealth was once as high as 66 billion yuan. However, even Jiang Weiping, who is regarded as a lithium industry boss by the outside world, cannot escape the curse of the cycle. In the latest "2024 Hurun Global Rich List", Jiang Weiping's wealth has dropped to 32.5 billion yuan, a decrease of 33.5 billion yuan compared with before.
In the first quarter, the net profit was thunderous, and the market value of Tianqi Lithium evaporated 7.4 billion yuan in one day
On the evening of April 23, Tianqi Lithium released an announcement on its performance forecast for the first quarter of 2024. According to the announcement, in the first quarter of this year, Tianqi Lithium expects the company's net profit to be negative, with a net profit loss attributable to shareholders of listed companies between 3.6 billion yuan and 4.3 billion yuan, and a net profit loss of between 3.6 billion yuan and 4.4 billion yuan after deducting non-recurring gains and losses.
Looking at the above data alone, it may not be enough to intuitively feel the scale of Tianqi Lithium's loss in the first quarter. For reference, in the first quarter of last year, Tianqi Lithium's net profit attributable to shareholders of listed companies was as high as 4.875 billion yuan. In contrast, Tianqi Lithium's forecast net profit in the first quarter of this year can be described as a nearly 180-degree reversal.
For the whole year last year, Tianqi Lithium's net profit attributable to shareholders of listed companies was 7.297 billion yuan. In other words, in the first quarter of this year alone, Tianqi Lithium lost at least about half of last year's net profit, or even nearly 60% at most.
In fact, in the fourth quarter of last year, Tianqi Lithium has fallen into a loss quagmire. Even compared with the fourth quarter of last year, Tianqi Lithium's expected net profit indicator for this quarter is still a significant deterioration. At that time, Tianqi Lithium recorded a net profit loss attributable to shareholders of the listed company of 801 million yuan. In contrast, Tianqi Lithium's net profit loss in the first quarter widened by 3.49 to 4.37 times.
From a profit of 4.875 billion yuan in the first quarter of last year to an expected loss of at least 3.6 billion yuan in the first quarter of this year, what did Tianqi Lithium experience during this period? First, affected by the fluctuation of the lithium product market, the sales price of the company's lithium products decreased sharply compared with the same period last year, and the gross profit of lithium products fell sharply.
Second, as of the date of this earnings announcement, Tianqi Lithium's important associate company, Sociedad Química y Minera de Chile S.A. (hereinafter referred to as "SQM"), has not announced its first quarter 2024 earnings report. Tianqi Lithium has taken into account the reliable information available to it and has used the usual methodology to calculate the company's investment income on SQM for the same period based on information such as Bloomberg's forecast of earnings per share for the first quarter of SQM2024.
In addition, SQM announced that the Court of Santiago, Chile, ruled in April 2024 on its tax proceedings for the 2017 and 2018 tax years, reversing the decision of the Tax and Customs Court on November 7, 2022, in the case. SQM is reviewing the accounting treatment of all tax dispute amounts based on the latest ruling and expects that it may reduce its net profit for the first quarter of 2024 by approximately US$1.1 billion.
Based on the principle of prudence and repeated arguments, Tianqi Lithium believes that the recognition of the impact of the above-mentioned SQM tax dispute ruling in the investment income of the associate company in the reporting period is more in line with the accounting standards, and this matter is expected to reduce the company's net profit attributable to the parent company.
According to the above-mentioned Bloomberg forecast data, combined with the impact of the SQM tax dispute ruling, the results of the first quarter of SQM2024 are expected to decline significantly year-on-year, so the company's investment income in the associate recognized in the reporting period decreased significantly compared to the same period last year.
Or affected by the performance forecast, Tianqi Lithium was quickly treated "coldly" in the capital market. As of the close of trading on April 24, Tianqi Lithium's A-share share price fell 9.99%, and its market value evaporated about 7.4 billion yuan in one day. At the same time, Tianqi Lithium's Hong Kong stock price also suffered a heavy fall, plummeting 19.15% on the same day.
In addition to being voted with their feet by investors, Tianqi Lithium's performance announcement that it expects a huge loss in the first quarter has also attracted the attention of the Shenzhen Stock Exchange. On April 23, the Shenzhen Stock Exchange issued a letter of concern to Tianqi Lithium.
The Shenzhen Stock Exchange requires Tianqi Lithium to quantitatively analyze the reasons for the significant increase in losses in the first quarter compared with the fourth quarter of last year in combination with the specific changes in the development of its main business, product production and sales, product prices, raw material purchase prices, costs and expenses, impairment provisions and other factors, and explain whether there is a risk of continuous losses, and whether the changes in the company's operating conditions are in line with the trend of industry changes and whether they are consistent with the changes in the performance of comparable companies.
In addition, the letter of concern issued by the Shenzhen Stock Exchange also requires Tianqi Lithium to explain the specific situation and subsequent progress of the SQM tax dispute ruling, the amount of impact on the company's net profit in the first quarter and the calculation basis, and the company will confirm whether the impact of the relevant tax dispute ruling is in line with the relevant provisions of the accounting standards for business enterprises in the first quarter.
It is worth noting that according to Tianqi Lithium's previously released 2023 annual report, the closing balance (book value) of the company's long-term equity investment in SQM was 26.163 billion yuan. Recently, there have been media reports that SQM has signed a memorandum of understanding (MoU) with Chile's National Copper Company (Codelco).
Therefore, in the letter of concern, the Shenzhen Stock Exchange also required Tianqi Lithium to verify and explain the specific circumstances of the relevant matters, assess the impact on the company and explain the countermeasures to be taken, and fully indicate the relevant risks.
Behind the decline in lithium prices + the decrease in investment income, there have been signs of weakness last year
The periodic table that I was exposed to when I was a student had a lot of business behind it. As a lithium mining giant, Tianqi Lithium is inseparable from the third element in the periodic table - lithium.
According to public information, lithium is the world's lightest and largest electrochemical equivalent metal, with characteristics such as high oxygen density, and its content in the earth's crust is about 0.0065%, ranking 27th in abundance. What's more, lithium has an important strategic position in the energy sector.
With the active promotion of the development of the new energy industry in major countries or regions around the world, the global market sales of new energy vehicles are growing rapidly. This trend has significantly promoted the growth of demand for power batteries, which in turn has triggered the adjustment of the demand structure of lithium, and the lithium battery industry has also become the main force driving the growth of lithium demand.
Since its establishment, Tianqi Lithium has developed into a new energy materials enterprise with lithium as the core. It is understood that Tianqi Lithium's business mainly covers the key stages of the lithium industry chain, including the development of hard rock lithium ore resources, lithium concentrate processing and sales, and the production and sales of lithium chemical products.
Geographically, Tianqi Lithium has a strategic presence in China, Australia and Chile, and is one of the few companies in the world that holds both the world's highest-quality hard rock lithium mines and lithium salt lake core resources.
For example, Tianqi Lithium's Greenbush spodumene mine is the world's highest-grade and largest spodumene project, Tianqi Lithium's SQM-operated Atacama Salt Lake is the world's largest lithium salt lake project, Tianqi Lithium's Spodumene Mine in Yajiang Cuola, Sichuan Province, is part of Asia's largest hard-rock methyl card lithium mine, and Tianqi Lithium also has a stake in Shigatse Zabuye Salt Lake, which is one of the world's rare natural lithium carbonate resources.
Looking back on the development history of Tianqi Lithium, it can be said that the company has prospered because of lithium. However, since last year, the company's life has not been very "moist".
According to the financial report, in 2023, Tianqi Lithium will record a revenue of 40.5 billion yuan, a slight increase of only 0.13% compared with the revenue of 40.45 billion yuan in the same period last year.
In terms of profit, Tianqi Lithium's net profit attributable to shareholders of listed companies in 2023 will be 7.297 billion yuan, while Tianqi Lithium's net profit attributable to shareholders of listed companies in 2022 will be as high as 24.12 billion yuan. Compared with the previous year, Tianqi Lithium's net profit indicator will decline by nearly 70% in 2023.
In this regard, Tianqi Lithium explained that, first, affected by the fluctuation of the lithium chemical product market, the sales price of the company's lithium chemical products decreased compared with the previous year, and the gross profit of lithium chemical products declined.
Second, the increase in the selling price of lithium concentrate compared with the previous year led to an increase in the net profit of the company's holding subsidiary, Windfield Holdings Pty Ltd, an increase in income tax expenses, and an increase in the profit and loss of minority shareholders.
Third, SQM's 2023 annual results decreased by approximately 48% year-on-year, and the company's investment income from the associated company recognized in 2023 also decreased year-on-year compared with 2022.
Fourth, in 2022, the company's shareholding company SES Holdings Pte.Ltd (hereinafter referred to as "SES") was listed on the New York Stock Exchange, and the company lost a significant impact on SES due to the passive dilution of its equity holdings, resulting in investment income from long-term equity investment to investment in other equity instruments, which was not the same in 2023, resulting in a year-on-year decrease of about 1.2 billion yuan in investment income. The above-mentioned investment income from the passive disposal of long-term equity investments due to passive dilution is a non-recurring profit or loss.
In addition, in light of market conditions, the company's operating forecast, etc., and in accordance with relevant accounting policies, Tianqi Lithium conducted an impairment test for assets with signs of impairment at the balance sheet date in 2023, and recognized impairment losses on assets that were impaired.
Huafu Securities pointed out in the research report that the price of lithium salt and lithium ore is inverted, and the company's performance will be under pressure in 2023. In terms of volume, in 2023, the company's concentrate output will be 1.523 million tons, a year-on-year increase of +12.9%, a sales volume of 845,000 tons, a year-on-year increase of +11.3%, and an inventory of 409,000 tons, a year-on-year increase of +38.3%. The output of lithium salt was 50,700 tons, a year-on-year increase of +7.3%, the sales volume was 56,700 tons, a year-on-year increase of -2.5%, and the inventory was 13,200 tons, a year-on-year increase of +350.3%.
From the price point of view, the average price of lithium concentrate in 2023 will be 4,586 US dollars/ton, +58% year-on-year, higher than the market price, the average price of lithium carbonate will be 263,000 yuan/ton, -46.7% year-on-year, and lithium hydroxide will be 275,000 yuan/ton, -42.8% year-on-year, and the price adjustment of concentrate will be slower than the decline of lithium prices. For this reason, the consolidated COGS per tonne of concentrate in 2023 was $599, -6.4% y-o-y, mainly due to lower lithium prices and lower royalties.
The "lithium king" could not escape the curse of the cycle, and Jiang Weiping's wealth shrank by 33.5 billion
As the voice of Tianqi Lithium, Jiang Weiping has a firm grip on Tianqi Lithium, and is primarily responsible for the company's overall strategic planning and business development, as well as making major strategic decisions.
According to Tianqi Lithium's previously released financial report, as of the end of 2023, the company's controlling shareholder, Chengdu Tianqi Industrial (Group) Co., Ltd., held 416 million shares of the company, accounting for 25.37% of the total share capital. The actual controller of Chengdu Tianqi Industrial (Group) Co., Ltd. is the chairman Jiang Weiping himself, who holds 90% of the shares of Chengdu Tianqi Industrial (Group) Co., Ltd.
At the same time, Jiang Weiping's wife Zhang Jing also holds 10% of the shares of Chengdu Tianqi Industrial (Group) Co., Ltd., and directly holds 68,679,900 shares of Tianqi Lithium, corresponding to a shareholding ratio of 4.18%, and the two constitute a concerted action relationship.
Time goes back to the 70s of the last world, when Jiang Weiping, who had just recovered the college entrance examination system, became the first batch of young people to benefit at that time. Through his own efforts, Jiang Weiping successfully entered the door of Sichuan Agricultural Machinery College (now Xihua University).
After graduating from school and entering the society, Jiang Weiping has had many employment experiences. From 1982 to 1985, Jiang Weiping worked as a technician at Chengdu Machinery Factory. In 1985, Jiang Weiping was engaged in administrative management in Sichuan Jiusan Society. From 1986 to 1997, Jiang worked as a sales engineer at China Agricultural Machinery Southwest Company.
It wasn't until 1997 that Jiang Weiping decided to go to the sea alone to start a business and started an import and export business of minerals. And now Tianqi Lithium, which is the main source of Jiang Weiping's wealth, was actually a heavy burden of continuous losses and even insolvency.
Although the company, Shehong Lithium, looked like it was not looking good at the time, Jiang Weiping, who was keen-eyed and aware of the bright prospects of lithium resources, bought it in 2004. Later, Shehong Lithium became Tianqi Lithium, and Tianqi Group, helmed by Jiang Weiping, became the controlling shareholder of Tianqi Lithium.
Through the acquisition of 51% of the shares of the Australian mining company Talison and the acquisition of part of the shares of the Chilean mining company SQM, Tianqi Lithium has established its dominant position in the industry, but this kind of "snake swallowing elephant" type of mergers and acquisitions has also put Tianqi Lithium under huge operating pressure.
Part of the reason for Tianqi Lithium's huge loss in the first quarter is also related to the previous acquisition of SQM. The deal dates back to December 2018, when Tianqi Lithium acquired a 23.77% stake in SQM for $4.066 billion, making it its second-largest shareholder.
It is reported that SQM operates the Atacama project, the largest lithium salt lake in the world, with a resource of about 10.8 million tons of lithium metal equivalent, a lithium ion concentration of 1840mg/L, and a magnesium-lithium ratio of only 6.4, ranking among the top in the world in terms of resources and quality.
It is undeniable that due to stepping on the tuyere of new energy, Tianqi Lithium's market value in the capital market has increased many times compared with the beginning of its listing. Thanks to the favor of lithium resources in the market, Jiang Weiping has also successfully achieved a leap in wealth with Tianqi Lithium, which is at the helm. In the "Hurun Report" released in 2021, Jiang Weiping, who is the chairman of Tianqi Lithium, once had a wealth of 66 billion yuan.
However, with the decline in lithium prices in recent years, Jiang Weiping, who holds a lithium mining giant, has also tasted the shrinkage of his net worth. In the "2024 Hurun Global Rich List" announced not long ago, Jiang Weiping ranked 745th on the list with a wealth of 32.5 billion yuan. Compared with the previous wealth of 66 billion yuan, Jiang Weiping's wealth has shrunk by 33.5 billion yuan.
Jiang Weiping's wealth has shrunk sharply, which is closely related to Tianqi Lithium's performance in the capital market. According to Flush iFinD data, in the past year, Tianqi Lithium's A-share share price has fallen by 44.21%, and its market value has evaporated by more than 52.8 billion yuan.
At the results briefing held on April 9, an investor asked Tianqi Lithium, "At present, Tianqi Lithium's H-share valuation is low, and I think it has deviated from the company's value, does the company have any plans to boost the market and value management?"
In this regard, Tianqi Lithium said that the company has always attached great importance to the rights and interests of all shareholders, and continues to do a good job in shareholder communication, shareholder relationship maintenance, shareholder service, and protection of shareholders' interests.
For the repurchase, on September 23, 2022, the company repurchased the company's A shares for the first time through centralized bidding transactions. In addition, based on their confidence in the Company's future development prospects and recognition of their long-term investment value, the Company's major shareholders Tianqi Group and Zhang Jing voluntarily promised not to reduce their holdings of the Company's A shares for six months from August 23, 2023.
As of October 11, 2023, Tianqi Group has terminated its refinancing securities lending business ahead of schedule after comprehensively assessing the impact of the overall demands of minority shareholders, its own actual situation, and the progress of its refinancing business.
In Tianqi Lithium's view, lithium resources have certain industry particularities compared with other non-ferrous metal industries. Although there is a risk of cyclical price fluctuations in lithium prices, the high growth expectations of downstream terminals, especially new energy vehicles and ships, as well as the energy storage industry, and the tilt of relevant policies in the future are objective, so in the medium and long term, the company believes that the fundamentals of the lithium industry will continue to improve in the next few years.
Can Jiang Weiping lead Tianqi Lithium to create another brilliant future? Radar Finance will continue to pay attention.