Net profit is expected to increase by more than 32 times while the stock price has dropped by more than 35% this year. Why is the market not buying into the massive profit behind Tianqi Lithium Corporation (09696)?

On July 14, Tianqi Lithium Corporation (09696) disclosed a report that caught the attention of the entire A-share market: it is expected that the net profit attributable to the parent company in the first half of 2026 will be between 2.85 billion yuan and 4.25 billion yuan, a year-on-year increase of 3276% to 4935%; the net profit after deducting non-recurring items is expected to be between 2.81 billion yuan and 4.2 billion yuan, a year-on-year increase of 212778% to 318081%. This growth rate surpasses Shenzhen Longsys Electronics, which has previously attracted widespread attention in the A-share market, and currently ranks first in the A-share profit forecast list. On the same day, the other half of the "lithium industry giants", Ganfeng Lithium Group, also disclosed their performance forecast, expecting the net profit attributable to the parent company in the first half of the year to be between 3.65 billion yuan and 4.6 billion yuan, a year-on-year increase of 787% to 966%, turning a loss into a profit. Both giants in the lithium industry have achieved success, undoubtedly indicating a prosperous industry. However, the reaction from the capital market is intriguing. As of the close of trading on July 16, Tianqi Lithium Corporation's H shares were trading at 33.68 Hong Kong dollars, up 1.45% on the day, with a market value of 57.701 billion Hong Kong dollars. However, looking at a longer time frame, the stock price has fallen by nearly 35% since the beginning of the year. What is even more shocking is that compared to the high point of 69.15 Hong Kong dollars per share in early May, the decline is as high as about 51%. While the performance is impressive, the stock price performance is disappointing - this extreme contrast is the core contradiction that this article is trying to unravel. The explosive growth in performance is attributed to three factors resonating together, resulting in a more than 32-fold increase in profits for Tianqi Lithium Corporation. First, a very low profit base. In the first half of 2025, Tianqi Lithium Corporation's non-recurring net profit was only 1.32 million yuan. When lithium prices rebounded from the bottom and the average product price doubled, the year-on-year profit increase was naturally amplified. From January to June this year, the average prices of domestic lithium hydroxide and lithium carbonate reached 153,000 yuan/ton and 163,000 yuan/ton respectively, an increase of 126.9% and 131.5% compared to the same period last year. Second, a highly concentrated business structure. Unlike Ganfeng Lithium Group, which extends downstream and Qinghai Yanhu Industry, which produces both potassium and lithium, almost all of Tianqi Lithium Corporation's revenue comes from lithium mines and lithium salts - the revenue from these two major products accounted for 44.7% and 55% respectively in 2025. The higher concentration of the lithium business allowed Tianqi Lithium Corporation to fully benefit from the rising lithium prices in the first half of the year. Third, investment income from SQM. Tianqi Lithium Corporation holds about 21.9% of the shares of the Chilean lithium mining giant SQM. SQM's Atacama salt flat is one of the largest and most superior salt flat resources in the world. According to Bloomberg's forecast, SQM's performance in the first half of 2026 is expected to increase significantly year-on-year, leading to a substantial increase in investment income confirmed by Tianqi Lithium Corporation. In the first quarter of 2026, the company's investment income has reached 475 million yuan. It is clear that the exaggerated increase in profits from Tianqi Lithium Corporation is due to the low profit base, high business concentration, and external investment income growth. In fact, there were signs of Tianqi Lithium Corporation's explosion in the first half of 2026. In the full year of 2025, Tianqi Lithium Corporation achieved operating income of 10.346 billion yuan, a year-on-year decrease of 20.80%; net profit attributable to the parent company was 463 million yuan, a year-on-year increase of +105.85%, turning a loss into a profit. Despite a 21.03% year-on-year decline in lithium product prices, the rebound in lithium prices in the second half of the year led to a recovery in profitability. The net profit attributable to the parent company for 2025 was only 463 million yuan, with profits at a near ten-year low - setting the stage for the explosive growth in 2026. The first quarter of 2026 was a prelude to its performance explosion. In the first quarter of 2026, Tianqi Lithium Corporation achieved revenue of 5.128 billion yuan, a year-on-year increase of 98.44%; net profit attributable to the parent company was 1.876 billion yuan, a year-on-year increase of 1699.12%, and a quarter-on-quarter increase of 563.54%. The price of battery-grade lithium carbonate rose by 74.81% quarter-on-quarter, driving the explosive performance. The quarterly net profit has exceeded four times the net profit for the full year of 2025. Certainly, Tianqi Lithium Corporation's ability to turn a loss in 2025 into a more than 32-fold increase in net profit in the first half of 2026 is due to its resource endowment. It is worth noting that Tianqi Lithium Corporation holds two of the world's top lithium resources: the Greaves lithium mine owned by Tianqi Lithium Corporation is the highest-quality and largest-producing lithium spodumene mine in the world. With the completion and commissioning of the third lithium chemical grade spodumene factory (CGP3) at the end of 2025, the Greaves mine has increased its total capacity from 1.62 million tons per year to 2.14 million tons per year. The CGP3 produced its first batch of standard-grade lithium chemical grade spodumene products on January 30, 2026, with plans to ramp up production capacity throughout 2026. At the same time, the company also holds about 21.9% of SQM's shares. SQM has the world's largest lithium-containing salt flat - the Atacama salt flat in Chile, which has high lithium concentration, large reserves, and low extraction costs, making it one of the world's most superior salt flat resources. Additionally, the company's production capacity is currently being unleashed. On the lithium spodumene end: In 2025, Tianqi Lithium Corporation produced a total of 1.35 million tons of lithium spodumene. With the commissioning of CGP3, the total construction capacity of Greaves has reached 2.14 million tons per year, and is currently in a continuous ramp-up phase. On the lithium chemical side: The 30,000-ton lithium hydroxide factory in Zhangjiagang was commissioned in July 2025, increasing the company's annual production capacity of lithium chemical products to 121,600 tons; the Quinana Phase I lithium hydroxide project in Australia is also in a ramp-up phase. The company's global comprehensive lithium chemical product capacity will reach 122,600 tons per year. From the above data, it is clear that the explosive growth in Tianqi Lithium Corporation's performance is due to the resonance of multiple short-term factors, but the market's concern about the peak of lithium prices has already surpassed the current reality of explosive performance. Market Logic Switch: From "Immediate Profits" to "Future Oversupply" Looking at the industry situation in which Tianqi Lithium Corporation is located, the lithium prices in the first half of the year surged and then fell back, amidst increasing market long and short disagreements, highlighting the difficulty of sustaining the explosive performance. According to SMM statistics, in the first half of 2026, the prices of domestic battery-grade lithium carbonate showed a wide fluctuation, with an upward trend shifting the average price range from approximately 14,960 yuan/ton to 17,700 yuan/ton. At the beginning of the year, the price was around 11,700 to 12,000 yuan/ton, reaching a high of 20,000 yuan/ton in mid-May. The average lithium carbonate spot price in the first half of the year was about 16,340 yuan/ton, an increase of over 132% compared to the same period last year. In June, the price fell to the range of 15,600 to 16,000 yuan/ton. As of July 14, the benchmark price of battery-grade lithium carbonate was around 15,300 yuan/ton. Similarly, lithium prices on the mining side also showed a surge and then fall - the SMM lithium spodumene concentrate index started at around 2000 USD/ton at the beginning of the year, reaching a high of 2780-2840 USD/ton in mid-May, and then falling to the range of 2385-2480 USD/ton in June. At the same time, the lithium mining sector has continued to experience a deep correction. Among them, the Wand Lithium Mining Index fell by 23.46% in May, 9.77% in June, and continued to fall by over 12% from July 1 to July 15. In fact, behind the continuous decline in the lithium mining sector is the shift in market focus - the current market focus is no longer on the fundamentals of this year, but on the future supply and demand situation. The anticipation of new supplies from the resumption of lithium production in Jiangxi, Zimbabwe, and other areas, continues to exert downward pressure on the long-term expectations of lithium prices. In this market environment, the performance and valuation of Tianqi Lithium Corporation have shown a significant deviation. As of the close of trading on July 16, Tianqi Lithium Corporation's TTM price-earnings ratio was 22.85 times, and its price-to-book ratio was 1.099 times, both at near ten-year lows. In the divergence between performance and valuation, how should we assess the investment value of Tianqi Lithium Corporation? East Money Information Securities stated that Tianqi Lithium Corporation, as a global integration leader in lithium resources, has strong resource endowment, low cost advantages, a global layout of lithium chemical production capacity, and the ability to position itself for the next generation of battery materials. At the industry level, with global lithium resource capital expenditure entering a trough, supply disruptions in major production regions at home and abroad, the continuation of a high boom in the energy storage market, and steady growth in demand for power batteries, the supply and demand pattern in the lithium industry is expected to gradually shift from loose bottoms to marginal improvements. As a leading company with high self-sufficiency in upstream resources and strong profit elasticity, Tianqi Lithium Corporation is expected to fully benefit from the lithium price repairing the center, initiating the first coverage, and giving it a "buy" rating. However, it is important to note that the market's greatest concern still comes from the long-term supply and demand situation. The price of lithium carbonate has risen from 11,700 yuan/ton at the beginning of the year to a high of 20,000 yuan/ton in May, and then fell to around 16,000 yuan/ton in June. If lithium prices continue to weaken in the second half of the year, a fall in performance in the third and fourth quarters is a probable event. Earlier forecasts from Daiwa predicted a global oversupply of 54,000 tons of lithium in 2026. With concentrated resumption and ramping up of lithium production capacity both domestically and internationally, the tight supply situation of lithium resources in the first half of the year has been completely reversed. In conclusion From the above analysis, it can be seen that Tianqi Lithium Corporation's half-year profit increase of more than 32 to 49 times has caused a stir in the A-share market, with impressive figures, but the reality of a stock price falling by more than 35% since the beginning of the year and halving from its high point, reveals another layer of cold market logic: this report is a result of a resonance of low base numbers, high concentration, and SQM investment income, it is a one-time explosion rather than a trend resurgence. At the industry level, the fluctuation of lithium prices from high to low, the substitution of long-term anticipated oversupply for current high prosperity, has become the main pricing trend. Even though the company holds the two top global resources of Greaves and Atacama, with the capacity currently in a release cycle and the valuation compressed to near ten-year lows, the market still chooses to vote with its feet - cyclical stocks are not afraid of poor performance, but of the best performance when the supply and demand expectations have already turned the page. The convergence of Tianqi Lithium Corporation's "peak performance" and "bottom price" depends on when the market believes that this round of profit improvement is not the swan song of the cycle but a reshaping of the central scene of the new phase. After all, stock prices do not price in past glory, but vote for marginal changes in the future.