Performance Analysis of Tianqi Lithium and Ganfeng Lithium in 2023: Challenges and Opportunities in the Lithium Battery Industry

Abstract: This report analyzes the significant decline in net profit of Tianqi Lithium and Ganfeng Lithium in their 2023 performance forecasts, primarily attributed to the decrease in selling prices of lithium chemical products and impairment provisions on certain assets. While this phenomenon has raised concerns about the prospects of the lithium battery industry in the short term, there remains substantial potential for long-term growth and development. Despite facing challenges such as price downturns in the market, the lithium battery industry continues to hold promising opportunities. From demand expansion to supply innovation, the industry is poised for a brighter future, driven by the broad applications of lithium batteries in sectors like electric vehicles and supportive government policies worldwide.

Tianqi Lithium anticipates achieving a net profit attributable to shareholders of listed companies ranging from 6.62 to 8.95 billion yuan in 2023, a year-on-year decrease of 62.9% to 72.56%. Similarly, Ganfeng Lithium expects a net profit attributable to shareholders of listed companies ranging from 4.2 to 6.2 billion yuan, with a year-on-year decline of 79.52% to 69.76%. While these performance figures may appear concerning, contextualizing them within historical perspectives reveals a different narrative. Despite being projected as the lowest point in net profit estimates for both companies, 2023 marks the second-highest year for net profits, following only behind 2022. This suggests that despite the downturn in 2023, both companies have maintained relatively high profitability levels.

The primary reason for this downturn is the significant drop in prices of lithium chemical products. The spot price of battery-grade lithium carbonate plummeted from 500,000 yuan per ton at the beginning of 2023 to nearly 100,000 yuan per ton by the end of the year, marking an 80% decrease for the entire year. This fluctuation in prices can be attributed to shifts in supply and demand dynamics. The rapid growth of the electric vehicle industry has led to increased demand for lithium battery raw materials, resulting in continuous price hikes from 2019 to 2022. However, in 2023, factors such as increased upstream capacity, slowed downstream demand, and advancements in alternative technologies led to an oversupply situation, triggering a sharp decline in lithium prices.

Nevertheless, this does not signify the demise of the lithium battery industry. On the contrary, in the medium to long term, the industry still holds significant growth potential. Firstly, in terms of demand, the electric vehicle industry remains a high-growth market. According to the International Energy Agency's Global Electric Vehicle Outlook report, the global electric vehicle stock is projected to reach 250 million units by 2030, accounting for 12% of all passenger cars, and 1.4 billion units by 2050, representing 60% of all passenger cars. Moreover, the transition to electric vehicles extends beyond automotive industries, impacting energy, transportation, and environmental sectors, garnering robust government support and encouragement worldwide.

Secondly, in the supply aspect, the lithium battery industry continues to innovate and optimize. Leading companies like Tianqi Lithium and Ganfeng Lithium are actively expanding upstream resources, enhancing product quality, reducing production costs, and developing new technologies. For instance, Tianqi Lithium possesses rich lithium ore resources in Australia, Argentina, Chile, and is expediting the acquisition process of the U.S.-based SES Company to access its advanced solid-state battery technology. Ganfeng Lithium is exploring high-quality lithium ore resources in the Congo (DRC), Australia, and concurrently developing new products like solid-state batteries and ternary materials. Additionally, midstream battery companies like CATL and BYD have made significant strides in improving battery performance, reducing costs, and expanding market share.

In conclusion, although Tianqi Lithium and Ganfeng Lithium experienced a downturn in 2023, this does not overshadow their long-term prospects. On the contrary, considering both demand and supply factors, the lithium battery industry still holds significant growth potential. Therefore, it is essential to adopt a broader and long-term perspective when evaluating this industry, rather than being swayed by short-term price fluctuations.