Ganfeng’s stock sank 12.2 per cent to HK$28.05 in Hong Kong on Tuesday in the biggest sell-off since April 2022, a day after reporting a 98 per cent crash in third-quarter earnings, while the broader market retreated. Tianqi fell 3.8 per cent to HK$42.20, after a report last week showed its earnings tumbled 71 per cent from a year earlier.
The two stocks have slumped by 56 and 43 per cent, respectively, since lithium prices topped out in November 2022, erasing HK$173 billion (US$22 billion) of their market value, according to Bloomberg data.
“The downtrend is far from over,” Li Bin, analyst at Huatai Securities, said in a note on Monday.
Concerns about overcapacity have caused investors to reassess their valuation of Chinese lithium producers, along with the general waning of appetite for stocks as China’s stimulus-starved economy falters. Ganfeng and Tianqi were busy snapping up lithium-mining assets from the US to South America and Africa before prices surged in late 2020.
The Chinese-Australia battle for the DRC’s massive lithium lode
The Chinese-Australia battle for the DRC’s massive lithium lode
“We remain bearish on the lithium compound price outlook,” Daiwa analyst Dennis Ip said in a note last week. “With [source mineral] spodumene costs possibly falling faster than expected, we see higher-than-expected outputs from spodumene-based refineries suppressing compound prices.”
03:15
China-made battery plant upsets local residents in Hungary, triggering protests
China-made battery plant upsets local residents in Hungary, triggering protests
The bleak outlook has prompted analysts to cut their bullish predictions. Citigroup downgraded Tianqi’s Hong Kong-listed stock to neutral on Sunday and slashed its price target by nearly 50 per cent to HK$44. Morningstar on Tuesday trimmed its target for Tianqi to HK$51 from HK$55.
Analysts have now reduced their average 12-month price target for Ganfeng to HK$49.17 versus HK$63.15 at the end of August, according to Bloomberg data. The average target for Tianqi fell to HK$57.82 from HK$73.89 over the same period.
“Despite lower spot prices for feedstock, we believe Ganfeng still faced sluggish downstream demand on industry destocking, as well as elevated inventory cost,” analysts at Nomura said in a note on Tuesday.