On Friday, Citi analysts identified a buying opportunity in Ganfeng Lithium, a company that has been significantly impacted by the recent plunge in lithium prices. Lithium, a key component in the production of electric vehicle batteries, has seen its value drop by over 80% from its peak in 2022. This decline has affected Ganfeng Lithium's OTC share price, which has fallen by half over the past year.
Citi has responded to the decrease in share value by upgrading Ganfeng Lithium's investment rating from 'sell' to 'buy'. Alongside the upgrade, Citi has also increased the 12-month price target for the company's A shares to RMB44.90, up from RMB41.90. The A shares of Ganfeng Lithium closed on Thursday at RMB36.09.
The bank's optimistic stance is based on Ganfeng Lithium's ability to navigate the downturn in lithium prices. According to Citi, the company has managed to consume or write off most of its high-cost inventory, which includes raw materials, work in progress (WIP), and final products, during the second to fourth quarters of 2023. This, Citi believes, signals that Ganfeng Lithium's financial performance may be approaching its lowest point.
Citi also hinted at a potential increase in battery demand and production, anticipating a surge starting in March. This expectation is based on the prediction that the battery supply chain may experience a re-stocking phase in the coming weeks.
To capitalize on the potential growth, Citi has launched a 30-day upside Catalyst Watch for both the A-share and H-share of Ganfeng Lithium. This move suggests that the bank sees a short-term growth opportunity in the company's stock.
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