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Tianqi Lithium Alert:Mismatch of D/S balance vs demanding valuation;Sell maintained

发布时间:2017-08-18    研究机构:德意志银行

1H17results beat DBe but in-line with Bloomberg consensus

Tianqi Lithium announced its 1H17result after market close on 17August2017. The company delivered revenue of RMB2.4bn in 1H17, accounting for57% FY17DBe and 50% Bloomberg 2017full year estimates. NPAT for 1H17amounted to RMB924m, achieving 65% FY17DBe and 48% Bloomberg 2017full year consensus. 1H17results beat DBe due to slower-than-expectedlithium carbonate ASP drop, while in line with Bloomberg consensus.

Strong supply response let risk of price correction high in coming weeks

YTD Australian lithium import into China has gone up strongly 26% YoY, whileYTD China EV production also enjoyed 30% YoY uplift (but EV batteries onlyaccount for c.20-30% of total lithium demand). As per our Australian researchteam (report: “Mt. Marion site visit - Proving the point” dated 8August 2017),spodumene concentrates from Wodgina (Mineral Resources) could have soldinto China, equivalent to c.80ktpa LCE, which will likely impact the lithiumcarbonate price some time in 2H17. With big supply responses to high lithiumcarbonate prices, we expect D/S of lithium carbonate will likely be loosenedand correct lithium carbonate prices over coming quarters.

Mismatch of D/S balance vs. demanding valuation; Sell maintained

The company is currently trading at c. 34x 2017E consensus PE. With a highrisk of lithium carbonate price correction in coming quarters due to strongsupply responses, we believe this high valuation is not justifiable, especiallywhen Tianqi might not be able to have volume growth in 2018E. We re-iterateour Sell rating.