BofA Securities: Ganfeng Lithium Group (01772) Lithium Price Pullback Reflects Multiple Concerns; Company Says Market Demand Expectations Have Become Overly Pessimistic

BofA Securities released a research report stating that Ganfeng Lithium Group (01772) discussed the recent weakness in lithium prices on a conference call, which appears to reflect multiple market concerns, including rumors of major industry players cutting orders, concerns over supply-demand mismatch and inventory buildup as strong battery shipments have not been matched by downstream energy storage installations and EV sales, speculation about hidden inventories triggered by SMM data revisions, and the issue that high warehouse receipts do not necessarily indicate ample inventories. The bank maintained its "Buy" rating with an H-share target price of HK$70. The bank noted that Ganfeng disagrees with the pessimistic narrative and does not believe batteries are holding large inventories. The company's inventories are low, the industry is tight, and spot supply-demand is very tight. This year is in a state of shortage with continuous destocking, not a market of demand collapse. The company assumes next year's supply growth of 20% to 25% and demand growth of about 25%, and believes market demand expectations have become overly pessimistic; a fair lithium price is about RMB 150,000, but RMB 100,000 to 120,000 is key support, with costs rising faster than expected, and supply reductions already visible at the RMB 120,000 level. On projects, Goulamina security has improved, C1 cost is about US$300 per tonne, and Phase 2 construction is expected to begin in the first half of 2027; batteries are at full production and full sales of about 40 GWh this year, and are expected to exceed 55 GWh by 2027; solid-state battery commercialization is advancing.