What's new

The company announced that its technical renovation on alithium carbonate production line at its Yichun subsidiary wassuccessfully completed.

Comments

New production line commissioned; capacity to increase.

The company's new production line for battery-grade lithiumcarbonate started mass production last week. The successfultechnical renovation bodes well for the company’s plan of adding10,000t of lithium carbonate capacity.

Successful technical renovation could boost earnings.Through years of R&D, the company has completed the technicalrenovation on its lithium carbonate production line, increasing itslithium carbonate capacity by 5,000t. This could help lower itscost from Rmb90,000 to Rmb70,000 per tonne, or even lower ifthe volume of lepidolite mined could also expand.

Large orders for Joylong should secure full-year growth.

Affected by policy adjustment, the company’s AFV revenuetumbled 78.4% YoY to Rmb111mn in 1H17. However, thecompany has signed two large orders with Yinlong and NationalTransport Capacity. The two orders top Rmb4bn and will bedelivered before end-2018.

Valuation and recommendation

We maintain our earnings forecast and TP of Rmb18.34.

Maintain BUY.

Risks

AFV sales disappoint; delayed capacity expansion of lithiumcarbonate.