The performance thunder triggered a letter from regulators to inquire, the secondary market opened low and the stock price fell by nearly 20%, and on April 24, Tianqi Lithium (09696) ushered in the "darkest moment".
Zhitong Financial APP learned that on the evening of April 23, Tianqi Lithium released a performance forecast for the first quarter of this year: it is expected that the net loss in the first quarter of this year will be 3.6-4.3 billion yuan, compared with the net profit of 4.875 billion yuan in the same period last year, and the net profit will turn from profit to loss year-on-year. Tianqi Lithium's sudden large pre-loss attracted the attention of regulators, and soon after, Tianqi Lithium received a letter of concern from the Shenzhen Stock Exchange, requiring it to quantitatively analyze the reasons for the sharp increase in losses and explain whether there is a risk of sustained losses.
Tianqi Lithium said in its announcement that its performance fell sharply due to the volatility of the lithium product market and the impact of the decline in the performance of its associate company SQM.
Although the vaccination was given, the performance of the secondary market was still dismal the next day. Zhitong Financial APP observed that on April 24, Tianqi Lithium's A-share share price crashed and fell to a limit, and Hong Kong stocks fell by 19.86% intraday, and Qi Lithium's H-shares have fallen by 33.95% since the beginning of the year. And driven by Tianqi Lithium, the lithium battery sector in AH and AH also fell synchronously on the same day.
The "black swan" may be the direct cause of the performance explosion
Although Tianqi Lithium mentioned in the profit warning that there were two factors that caused the performance loss, the direct cause of its stock price flash crash on the 24th may not be the fluctuation of the market price of lithium products, but the decline in the performance of the associated company SQM.
Judging from the spot price trend of lithium carbonate, the price of battery-grade lithium carbonate in 2023 will fall from more than 500,000 yuan/ton at the beginning of the year to around 100,000 yuan/ton at the end of the year, a decline of more than 80%. The futures price of lithium carbonate on April 23 this year was 107,500 yuan/ton, indicating that the trend of low lithium prices in 2023 has continued to this day, which is also the main reason for the losses of many companies in the lithium product industry.
However, according to the data previously disclosed by Tianqi Lithium, the company's current average cost of lithium salt is only about 61,000 yuan/ton, and the cost advantage is outstanding. It is precisely for this reason that in the face of the collapse in lithium salt prices, Tianqi Lithium suffered a loss in a single quarter in the fourth quarter of last year, but the net loss was only 800 million yuan. The current price of industrial-grade lithium carbonate obviously has not broken through its cost floor price, so it is difficult to cause a profit loss of more than 3 billion yuan.
Compared with the market fluctuations and losses of lithium products that have been psychologically expected by the market, the "black swan" brought about by the "failure of stock speculation" on SQM is more like the main reason for the thunderstorm of Tianqi Lithium's performance.
According to Tianqi Lithium's announcement, one of the reasons for the loss was that "the company's important associate SQM's first-quarter results are expected to decline significantly year-on-year, and the company's investment income in the associate recognized in the reporting period was significantly lower than the same period last year due to the tax ruling that may lead to a reduction of about $1.1 billion in net profit in the first quarter of SQM2024." ”
According to Zhitong Financial APP, affected by factors such as resource endowment and lithium extraction path, the production cost of lithium salt enterprises varies greatly. According to the relevant data disclosed in the current annual reports of 12 sample companies in A-share in 2022, the average production cost of lithium salt is 124,400 yuan/ton.
However, Chile's SQM, in which Tianqi Lithium has a stake, operates the Atacama project, the world's largest lithium salt lake. According to Fastmarket's Q4 2023 data, the Atacama Salt Lake is the world's highest-producing lithium salt lake production project in 2023, accounting for 44% of the world's total salt lake supply. UNDER THE EFFECT OF RESOURCE ENDOWMENT, SQM HAS BECOME THE ENTERPRISE WITH THE LOWEST COST OF LITHIUM EXTRACTION FROM SALT LAKES IN THE WORLD, WITH A LITHIUM EXTRACTION COST OF ABOUT 3,000 US DOLLARS / LCE TON, EQUIVALENT TO 22,000 YUAN.
In 2018, Tianqi Lithium spent US$4 billion to become the second largest shareholder of SQM, and according to Tianqi Lithium's 2023 annual report, it currently holds a 22.16% stake in SQM, which is accounted for using the equity method to recognize investment income.
It is worth mentioning that in the cycle of soaring lithium prices in the past few years, Tianqi Lithium's profit growth is inseparable from the investment income contribution of SQM. Zhitong Financial APP learned that in 2021 and 2022, SQM's performance increased significantly, bringing investment income of 760 million yuan and 5.641 billion yuan to Tianqi Lithium respectively. As a result, Tianqi Lithium's performance has grown substantially. In 2021 and 2022, Tianqi Lithium's revenue and net profit both achieved triple-digit growth, of which Tianqi Lithium's revenue and net profit attributable to the parent company in 2022 increased by 427.82% and 1060.47% year-on-year, respectively.
However, in April this year, the court in Santiago, Chile, suddenly announced a ruling on SQM's tax litigation for the two tax years of 2017 and 2018, according to the latest ruling, SQM needs to review the accounting treatment of all tax dispute amounts, and expects net profit to decrease by about $1.1 billion in the first quarter of 2024. Compared with SQM's net profit of US$750 million in the same period last year, the above tax accounting treatment will undoubtedly cause it to lose money in the first quarter of this year.
If calculated based on Tianqi Lithium's current equity holding, SQM's net profit in the first quarter of this year decreased by US$1.1 billion, which may have an impact on Tianqi Lithium's earnings of US$244 million, equivalent to about RMB 1.768 billion.
Lithium prices are in sight, can it be a lifesaver?
As a typical cyclical product, lithium prices fluctuate closely with supply and demand, volume and price, especially the demand changes in the downstream power battery and new energy vehicle industries, which have a great impact on its production and sales.
According to Zhitong Financial APP, in the first quarter of this year, the cumulative installed capacity of power batteries in mainland China was 85.2GWh, a year-on-year increase of 29.4%; In terms of battery exports, from January to March this year, the total export of power and other batteries from mainland China reached 28.9GWh, a cumulative year-on-year decrease of 2.2%, compared with the total cumulative output of domestic power and other batteries of 184.6GWh, a cumulative year-on-year increase of 33.5%.
That is to say, in the first quarter of this year, the domestic power battery inventory has accumulated significantly. The reason for this phenomenon is that the downstream new energy vehicle market in the same period is in the off-season, and sales are not as good as other quarters.
According to the data, in the first quarter of this year, the production and sales data of new energy vehicles in mainland China showed a seasonal decline. According to data from the China Association of Automobile Manufacturers, from January to March 2024, the production and sales of new energy vehicles will be 2.115 million and 2.09 million units, respectively, an increase of 28.2% and 31.8% year-on-year, and a decrease of 34.7% and 34.2% month-on-month, respectively. However, in March this year, due to the rapid recovery of production and sales in the upstream and downstream of the industrial chain, the domestic production and sales data of new energy vehicles increased significantly month-on-month.
It is not difficult to see that the current demand side of lithium products has warmed up in the latter part of the first quarter of this year, and on the supply side, the price increase effect brought about by the increase in domestic production and the slowdown in imports is also gradually released.
According to SMM statistics, from January to March 2024, the cumulative output of lithium carbonate in mainland China will be 116,800 tons, a year-on-year increase of 20%; The cumulative output of lithium hydroxide (mainly used for processing high-nickel ternary materials) was 67,500 tons, down 2.8% year-on-year. From January to March this year, the ratio of the monthly output of lithium carbonate (10,000 tons) to the monthly output of cathode materials (10,000 tons) in mainland China continued to decline, indicating that the output of lithium carbonate raw materials was relatively insufficient, and the inventory of lithium carbonate raw materials was reduced.
On the other hand, from January to February this year, the mainland's lithium carbonate imports were 22,000 tons, an increase of only 2.1% year-on-year. Among them, 15,000 tons were imported from Chile, a year-on-year decrease of 20.4%.
In other words, after the first quarter of this year, the driving force of lithium prices at both the supply and demand ends has strengthened. Referring to the seasonal production and sales changes of new energy vehicles in previous years, the second quarter of this year may usher in a wave of demand-side increments, if the demand exceeds expectations, it may drive lithium prices upward, and this is expected to become a "life-saving straw" to save Tianqi Lithium's subsequent performance.