Ganfeng Lithium, a Chinese specialist in the lithium industry, experienced a drop in shares after reporting a decline in quarterly profit due to decreased demand and increased costs. The company's shares on the Hong Kong Stock Exchange fell by 14% to HKD 27.60 (USD 3.53) on Tuesday, marking the largest one-day percentage drop since April 2022. Meanwhile, shares listed on the Shenzhen Stock Exchange closed 3.2% lower at CNY 44.28.
Ganfeng Lithium, headquartered in Xinyu, China, disclosed that its third-quarter profit plunged 98% compared to the previous year. Additionally, the company reported a 43% decline in revenue, amounting to CNY 7.54 billion.
Analysts from Nomura noted in a research note that the decrease in sales was primarily driven by lower lithium prices and a contraction in gross profit margin, which they attributed to higher inventory costs for lithium ore, specifically spodumene. They suggested that Ganfeng Lithium's profitability was affected by sluggish downstream demand resulting from industry destocking and elevated inventory costs.
Looking ahead, Nomura analysts Ethan Zhang, Bing Duan, and Joel Ying expect Ganfeng Lithium's performance to improve sequentially in the fourth quarter. They believe this will be supported by stabilizing lithium-carbonate prices and lower spodumene prices, which will ultimately contribute to improved feedstock costs.
While maintaining a neutral rating and a target price of CNY 69.00 on Ganfeng Lithium's stock listed in China, Nomura mentioned that the forecasted numbers are currently under review.