1H25 results miss our expectations

Ganfeng Lithium announced its 1H25 results: Revenue fell 12.65% YoY to Rmb8.38bn. Attributable net loss widened 30.13% YoY to Rmb531mn, and recurring net loss was Rmb913mn. In 2Q25, revenue rose 1.62% YoY and 22.07% QoQ to Rmb4.60bn. Net loss attributable to shareholders was Rmb175mn and recurring net loss was Rmb671mn, falling 814.98% YoY but improving 176.91% QoQ, missing our expectations.

First, earnings and investment income declined due to falling lithium prices. The domestic price of battery-grade lithium carbonate fell 32% YoY to Rmb70,000/t in 1H25. We believe falling lithium prices weighed on the profit of the firm’s lithium business, with gross profit down 48% YoY to Rmb400mn in 1H25. Meanwhile, the decline in lithium prices led to a decrease in the firm's equity investment income in lithium mines.

Investment loss from associates was Rmb245mn in 1H25, including a Rmb370mn net loss at the Mt Marion lithium mine and a Rmb48mn net profit at Minmetals Salt Lake due to low costs.

Second, gross profit growth of lithium-ion battery business bolstered earnings. In 1H25, gross profit of the lithium-ion battery business rose 57.7% YoY to Rmb420mn, and gross margin rose 4.29ppt YoY to 14.17%, as profit growth of lithium battery business supported earnings.

Third, financial expenses rose due to growing interest-bearing liabilities. In 1H25, the firm's financial expenses rose 23% YoY to Rmb720mn. We believe the increase in financial expenses was mainly due to increased borrowings. Its debt-to-asset ratio rose 12.23ppt YoY to 58.6% as of 1H25.

Trends to watch

Integration of salt lake projects in Argentina advancing; supply of self-owned mines in Mali and Argentina rising. We believe the firm’s projects in Africa and Argentina will be the main sources of earnings growth in the future. In Argentina, Ganfeng Lithium announced plans with LAR to integrate Millennial as a joint venture, contributing three salt lake assets, PPG, PG, and Puna, to Millennial to jointly develop the Pozuelos Pastos Grandes salt lake basin. Ganfeng Lithium and LAR will hold 67%　　and 33% stakes in Millennial after the integration. In Mali, the Goulamina lithium mine is an important source of hard-rock lithium mines in the future. Phase I of the project (with production capacity of 506,000t/yr) has been put into operation, and the firm is accelerating the capacity ramp-up of this project.

Financials and valuation

We maintain our 2025 and 2026 net profit forecasts. Given the low lithium price in 2025, we roll over valuation to 2026. A-shares are trading at 41.0x 2026e P/E, and H-shares at 29.2x 2026e P/E. As the firm's projects in Argentina and Mali have unleashed long-term growth potential, we maintain OUTPERFORM and lift our A- and H-share TPs 8% and 29% to Rmb41.60 and HK$32.16, implying 43.5x 2026e P/E for A-shares and 30.4x 2026e for H-shares, and offering 6% and 4% upside.

Risks

Sharper-than-expected decline in lithium salt prices; liabilities continue to rise; risks related to development of overseas resource projects.