"Large Banks" Huayan raised Ganfeng Lithium's target price to 54 yuan, optimistic about long-term fundamental improvements

HSBC's research report indicates that lithium prices in China recently plummeted, primarily due to exchanges raising trading fees and tightening position limits to curb speculative trading. Additionally, there are reports that Contemporary Amperex Technology Co., Limited (CATL) (03750.HK) may restart production at its Yichun lithium mine as early as next month. The bank believes that Ganfeng Lithium (01772.HK) will face short-term pressure on its stock price, but there are several positive developments in the medium term that could support the stock price, including the commissioning of the Sichuan project, which will drive growth in lithium chemical sales in the fourth quarter, and projects like Goulamina that will increase its lithium carbonate equivalent (LCE) supply ratio to over 50% and drive a structural decrease in average unit costs.

Furthermore, the company continues to strengthen its integrated layout from resource extraction, lithium chemicals, battery manufacturing, energy storage applications (ESS) to solid-state materials, allowing it to gain an advantage as market conditions tighten further. With the rebound in lithium prices and declining costs, even if lithium prices normalize next year, the company is expected to return to profitability; if lithium prices rise further, there will be significant upside potential for profits.

Overall, the bank is optimistic about production growth, cost improvements, and strengthening lithium prices, which will help consolidate the company's medium-term outlook; the target price for Ganfeng Lithium's H shares has been significantly raised from HKD 33.4 to HKD 54, and the target price for Ganfeng Lithium's A shares (002460.SZ) has been raised from RMB 41.9 to RMB 65, maintaining a "Buy" rating.

The bank also anticipates that lithium supply will continue to be in surplus in 2026, but the buffer space will continue to narrow. If global electric vehicle and energy storage battery production exceeds expectations or if there are moderate-scale supply disruptions, the market may quickly shift to tightening