UOB Kay Hian
Date of Report: August 25, 2025
Ganfeng Lithium (1772 HK) Set for Turnaround: Price Recovery and Cost Optimization Drive Bullish Outlook

Overview: Ganfeng Lithium Group Poised for Recovery in 2025

Ganfeng Lithium Group Co. (HK: 1772), a leading lithium producer in China, is attracting renewed attention from investors after a turbulent year marked by significant losses. UOB Kay Hian’s latest research maintains a BUY rating, with a target price of HK\$40.00, reflecting a 29.9% upside from the current HK\$30.80. The company’s strategic cost reduction and expected lithium carbonate price rebound are set to catalyze a turnaround from Q3 2025 onwards.

Company Snapshot: Ganfeng Lithium Group

• Industry: Materials (Lithium products, including lithium metal, lithium aluminium hydride, lithium fluoride, and lithium chloride)
• Market Cap: RMB 8,879 million (US\$1,146 million)
• Shares Issued: 288 million
• Major Shareholders: Li Liangbin (13.4%), Wang Xiaoshen (5.0%)
• 52-week Price Range: HK\$35.78/HK\$15.44
• Recent Performance: YTD +53.2%, 1Yr +65.2%

2Q25 Results: Losses Narrow But Remain Significant

Ganfeng reported a 2Q25 core net loss of RMB671 million, up 177% quarter-on-quarter, but in line with the high end of guidance. The losses were primarily driven by a sharp drop in lithium carbonate prices, which compressed margins and dampened average selling prices (ASP). However, one-off gains from asset disposals in 1H25 helped to narrow the headline net loss to RMB531 million, a 30% year-on-year improvement.

Financial Highlights and Outlook

• Operating Cash Flow: Positive again in 2Q25 (RMB1.87 billion inflow) after a negative Q1, driven by inventory and receivables drawdown.
• Free Cash Flow: Remains negative, at RMB -1,122 million for Q2.
• Gross Margin: Compressed to 9.6% in 2Q25, down from 16.1% a year earlier.
• EBIT Margin: -1.9% in 2Q25, reflecting persistent pricing pressures.

Key Financials (Historical & Forecast)

Stock Impact: Catalysts for Recovery and Growth

Lithium Carbonate Price Rebound

• Recovery in lithium carbonate prices is driving the anticipated turnaround from Q3 2025 onwards.
• Market supply is being curtailed by production suspensions, most notably CATL’s closure of a major lithium mine in Yichun, Jiangxi Province, which removes 46,000 tonnes of lithium carbonate equivalent (LCE)—about 3% of global supply.
• Regulatory crackdowns and production cuts globally (e.g., Australia’s Greenbushes mine) are expected to further reduce surplus.

Diversification of Demand

• Slowing EV demand is being offset by robust growth in energy storage (30-40% CAGR projected over the next 2-3 years) and emerging sectors like robotics and eVTOL (electric vertical takeoff and landing vehicles).

Supply-Demand Rebalancing

• Global surplus expected to be less than 100,000 tonnes LCE in 2025, down from previous expectations of 200,000 tonnes.
• 2026 anticipated to bring further balance as high-cost mines (~20% of new capacity) exit permanently.

Production Expansion and Cost Reduction

• Ganfeng’s upstream projects—Goulamina (Mali), Cauchari-Olaroz (Argentina), and Sichuan Salt Lake (China)—are ramping up production, supporting cost reduction efforts for lithium carbonate.
• Sichuan project commencement in late 2024 lifts total production capacity to 300,000 tonnes LCE.
• Sales volume estimates for lithium compounds are maintained at 156,000 (2025), 187,000 (2026), and 224,000 (2027) tonnes LCE, implying a 20% CAGR.

Price and Margin Assumptions

• Lithium carbonate ASPs are forecast at RMB75,000/tonne (2025), RMB100,000/tonne (2026), and RMB120,000/tonne (2027).
• Prices rebounded from RMB60,000/tonne in June to above RMB80,000/tonne, with expectations of reaching RMB90,000/tonne by end-2025 and over RMB100,000/tonne in 2026.
• Gross margin assumptions: 14% (2025), 16% (2026), 18% (2027).

Earnings Forecast and Valuation

• 2025 net loss forecast: RMB149 million; core net loss: RMB531 million.
• 2026-27 net profit forecast: RMB1,359 million (2026), RMB2,733 million (2027).
• Target price remains HK\$40.00, based on a 10-year DCF (WACC: 15.5%, terminal growth: 4%).
• Valuation: Implied 1.8x 2025 P/B versus historical mean of 2.4x, with current undervaluation providing a compelling entry point for long-term investors.

Key Catalysts for Upside

• Continued recovery in lithium carbonate prices.
• Closure or suspension of peers’ production facilities, further tightening supply.

Profit & Loss, Balance Sheet, and Cash Flow Forecasts

Conclusion: Long-Term Value Opportunity Despite Short-Term Volatility

With the worst seemingly behind, Ganfeng Lithium is well-positioned for a robust turnaround, buoyed by improving lithium carbonate prices, disciplined cost management, and expansion in production capacity. The current depressed valuation offers an attractive entry point for investors seeking exposure to the global lithium supply chain. Key catalysts remain the ongoing recovery in lithium prices and further tightening of supply as competitors shutter high-cost operations. UOB Kay Hian’s BUY rating and HK\$40.00 target price underscore a strong conviction in Ganfeng Lithium’s medium- and long-term prospects.