Tianqi and Ganfeng Earnings: Both Reported Losses Due to a Prolonged Fall in Lithium Prices

Chinese lithium producers Tianqi and Ganfeng both reported net losses for the first quarter, mainly attributable to the decline in lithium compounds' selling prices and the drop in gross margin. With lithium prices plunging more than 70% year over year in the first quarter, the gross margin contracted by 41 percentage points year over year for Tianqi and 31 percentage points for Ganfeng. Tianqi also recorded losses from equity holdings in Sociedad Quimica Y Minera De Chile SA. Given the weaker-than-expected earnings, we cut Tianqi’s 2024-26 net profit forecast by 25%-39% to factor in lower lithium compound and lithium concentrate prices and production margin assumptions, as well as lower equity income contributions. Due to lower compound prices and margin assumptions, our 2024-26 net profit forecast for Ganfeng was reduced by 15%-28%.