Tianqi Earnings: Quarterly Loss as Guided; Falling Lithium Price Continues to Pressure Margin

Tianqi’s second-quarter net loss was at the midpoint of its preliminary announcement, but missed our expectation mainly due to the decline in lithium product selling prices and drop in equity income. With the lithium price dropping more than 50% in the second quarter, gross margin remained under pressure, tanking 31 percentage points year over year, dragged by both the lithium compound and lithium mining segments. We lower our fair value estimate to HKD 31.50 (CNY 28.10) per share from HKD 37.90 (CNY 33.80), which implies a 2025 price/earnings ratio of 10 times. We expect investors to be sidelined, in any case, as prices have yet to bottom, with the battery-grade lithium carbonate spot price in China—which had stabilized in the second quarter with 6% sequential growth—falling 23% year over year in July and August.