Tianqi’s Strong Q3 Likely To Trigger Consensus Earnings Upgrade; HKD 102/CNY 92 FVEs Retained

Narrow-moat Tianqi reported strong third-quarter net profit growth of 12 times year over year to CNY 5.7 billion, around the midpoint of the company’s preliminary announcement. First nine months revenue and net profit accounted for 76% and 81% of our full-year forecast, respectively. Significant profit growth was mainly underpinned by record lithium prices due to robust demand for lithium compounds used in new energy vehicles. We maintain our fair value estimate at HKD 102 (CNY 92), which implies a 2023 price/earnings ratio of 6.5 times. The H-shares, at 36% discount to its A-shares and 34% discount to our fair value estimate, are attractive in our view, but the A-shares are fairly valued.