In recent years, with the booming development of the global new energy vehicle industry and the continuous expansion of the power battery market, enterprises in the lithium industry chain have ushered in unprecedented development opportunities. As a leading enterprise in the new energy lithium material industry, Huayou Cobalt (603799), with its reasonable industrial layout and business strategy, has not only realized a stable recovery of operating results and significant improvement of cash flow in the fierce market competition, but also accumulated the power to cross the cold winter of lithium industry.

The integration of the industrial chain proceeds with cost reduction and efficiency enhancement, resulting in a significant improvement in cash flow

According to the 2024 semi-annual performance report disclosed by Huayou Cobalt, in the first half of the year, the company realized operating income of CNY 30.050 billion, and net profit reached CNY 1.671 billion, of which the net profit of the second quarter increased by 119.81%, and maintained a strong growth momentum for two consecutive quarters. It is worth mentioning that the net cash flow generated from the company's operating activities in the first half of this year reached CNY 2.764 billion, an increase of 54% over the same period last year.

Huayou Cobalt actively participates in global resource allocation, forming a complete integrated development pattern of new energy lithium materials from nickel, cobalt and lithium resource development, green smelting and processing, ternary precursor and cathode material manufacturing to resource recycling.

▲Huayou Quzhou Industrial Park

Huayou Cobalt's “Huafei 120,000 tons of nickel metal per year project” has reached production at the end of the first quarter of 2024, becoming the world's largest nickel laterite hydrometallurgical project; Huayue's 60,000 tons of nickel metal hydrometallurgical project has continued to have stable and super-productive capacity; Huake's 45,000 tons of nickel high grade matte project has stable operation; SCM slurry pipeline is in stable operation, which further reduces the production cost of MHP. At the same time, relying on the advantages of upstream resource development, Huayou is promoting the extension of the industrial chain to the downstream. Huaxiang annual output of 50,000 tons of nickel sulfate project proceeds in order, Huaneng annual output of 50,000 tons of ternary precursor project starts construction, further enhancing the synergistic advantages of the nickel industry in Indonesia, the new energy lithium materials integrated development model in Indonesia gradually landed. The advancement of these projects has further consolidated the company's international competitive advantages and market position in the field of new energy materials.

Besides, in South Korea, part of the production line of Gumi anode project cooperated by Huayou Cobalt and LG was put into production, and the company entered the North American market; in Europe, the first phase of the 25,000-ton of anode materials project in Hungary started, which means the company takes a substantial step forward into the European market. The company actively promotes the opening of industrial chain, international cooperation and global layout, and deeply integrates with the world's new energy automobile industry, and establishes close cooperation with LG, Volkswagen, Ford and other famous enterprises, which provides solid raw material guarantee and market support for the company's industrial integration. Thanks to the integrated layout of upstream resources, the cost control of the company's products has reached expectations.

▲Huayue Project in Indonesia

The company has continued to improve its management ability and governance level, and has taken multiple measures to  reduce costs and increase efficiency. The half-yearly report shows that Huayou Cobalt, according to the business characteristics and operating characteristics, pays close attention to increasing revenue and reducing consumption, improves the efficiency of labor, and seeks benefits from management, and the company's administrative expenses decreased by about 15% compared with the same period of last year; continues to promote the innovation of production and manufacturing processes; attaches great importance to the safety of the capital chain, adheres to the combination of production and financing; deepens the linkage between banks and enterprises, and reaches a strategic cooperation with the head office of CITIC, Ping An, Minsheng, Pudong Development and many other banks, the financing structure is constantly optimized, direct financing, long-term financing accounted for a higher proportion; strengthen the liquidity management, the company's money funds balance at the end of the reporting period of CNY 19.003 billion, an increase of 24.53% compared with the end of the previous year.

At the same time, the company also actively promote share buyback and profit distribution plan, and paid cash dividends of CNY 10.00 per 10 shares to shareholders, with a total dividend of CNY 1.675 billion, demonstrating the company's importance to shareholder returns and confidence in future development.

The development momentum Lithium industry is good, the market demand continues to grow

In the past few years, China's new energy automobile industry has entered the stage of comprehensive market-oriented competition, new energy vehicle enterprises relying on China's complete local industrial chain advantage in the global competition has shown a first-mover advantage, becoming a typical representative of the new quality productivity. At present, China's new energy automobile industry is moving from the stage of high-speed development to the new stage of globalization and intelligent high-quality development.

According to the data of China Passenger Federation Branch, the domestic new energy vehicle market retailed 4,988,000 units from January to July 2024, an increase of 33.7% year-on-year, and the domestic retail penetration rate of new energy vehicles was 51.1% in July, an increase of 15% compared with the same period last year, and the retail sales of domestic new energy passenger cars exceeded that of fuel passenger cars for the first time. From a global perspective, the new energy vehicle industry maintains a high growth rate, and the general trend of electrification remains unchanged. According to CleanTechnica, global sales of new energy vehicles reached 7.170 million units in the first half of 2024, up 23% year-on-year.

The broad market prospects of new energy vehicles have brought business opportunities for the entire industry chain of lithium materials. According to GGII data, the global power battery installed capacity in the first half of 2024 was about 346.5GWh, up 15% year-on-year. According to the relevant organizations, the global new energy vehicle sales in 2024 will reach 16.7 million, an increase of 19% year-on-year, corresponding to the demand for power batteries will reach 970GWh, and the total demand for lithium will reach 1419GWh, an increase of 23% year-on-year. This huge market demand provides a broad space for the development of enterprises in the lithium industry chain.

▲Huayou Chengdu B&M

Huayou Cobalt follows the changes in market demand, and is constantly optimizing its product structure and improving product quality. The company's new energy business focuses on the research, development, production and sales of lithium anode materials, including ternary anode materials and lithium cobalt oxide, which are widely used in electric vehicles, energy storage systems, electronics and other fields. Meanwhile, the company is also actively expanding its new material business, including the R&D, production and sales of ternary precursor materials and new material products of nickel, cobalt and lithium, to further consolidate its leading position in the lithium industry chain.

In the face of the broad development prospects of the lithium industry and the increasingly fierce competition in the market, Huayou Cobalt indicated that it will continue to adhere to the overall development idea of “Controlling the Resources Upstream, Developing the Markets Downstream, Enhancing the Capability from Within”, continue to deepen the global layout of industrial integration, create comprehensive competitive advantages in industrial integration, and endeavor to build a new quality productivity pattern of industrial integration. The company will continue to increase R&D investment and technological innovation in the field of new energy lithium materials to promote product upgrading and industrial upgrading; at the same time to strengthen cooperation and exchanges with internationally renowned enterprises, and jointly promote the prosperity and development of the global lithium industry.