2025 results beat our expectations

The firm announced its 2025 results: Revenue rose 22.1% YoY to Rmb23.08bn; attributable net profit turned profitable to Rmb1.61bn. In 4Q25, revenue rose 69.8% YoY and 35.3% QoQ to Rmb8.46bn, and attributable net profit was Rmb1.59bn. The firm's 2025 results beat our expectations due to non-recurring gains.

First, lithium carbonate prices declined, but rising output and lower costs supported profit. In 2025, the selling price of lithium carbonate fell 25% YoY to about Rmb69,666/t. However, lithium prices recovered notably in 4Q25. Full-year sales volume of lithium salts rose 42.5% YoY to 182,419t of lithium carbonate equivalent (LCE), driven by new production capacity. The average selling cost of lithium salts fell 29% YoY to Rmb59,000/t, mainly due to lower concentrate costs and a higher proportion of self-owned mines.

Second, non-recurring gains contributed significantly to attributable net profit. In 2025, the firm's non-recurring gains reached Rmb2bn, as: 1) The disposal of some stakes in its subsidiary Shenzhen Yichu Technology and associates generated Rmb1.63bn in gains; and 2) higher share prices of financial assets held by the company generated Rmb369mn in gains.

Trends to watch

Accelerated ramp-up of self-owned mines boosts the battery business. For the lithium business, we estimate that the firm's resource self-sufficiency rate will rise from 32% in 2025 to 47% in 2026, mainly driven by capacity expansion at Cauchari Salt Lake and Mariana Salt Lake in Argentina, and rising output at Goulamina Lithium Mine in Mali.

Gross profit of the battery business rose 75% YoY to Rmb1.2bn in 2025, due to booming demand for energy storage batteries. Output of the electric vehicle and energy storage batteries rose 136% YoY to 27GWh in 2025, bolstering earnings growth. The company continued to make breakthroughs in solid-state battery technologies, and its battery-grade lithium sulfide production lines ramped up.

Financials and valuation

Given a notable increase in lithium prices, we lift our 2026 earnings forecast 150% to Rmb4.83bn, and introduce our 2027 earnings forecast at Rmb5.85bn. A-shares are trading at 34.7x 2026e P/E. H-shares are trading at 28.3x 2026e P/E. We maintain our OUTPERFORM ratings for A-shares and H-shares. We lift our target price for A-shares 110% to Rmb87.43 (38.0x 2026e P/E with 9.4% upside). We raise our TP for H-shares 150% to HK$80.5 (31.1x 2026e P/E with 10.1% upside).

Risks

Sharper-than-expected decline in lithium salt prices; intensifying competition in batteries; risks related to overseas projects.