China Materials 5 May 2020 Ganfeng Lithium (1772 HK) Target price: HKD29.00 (from HKD26.00) Share price (5 May): HKD25.95 | Up/downside: +11.8% Upgrade on NEV policy and Tesla’s expansion in China Dennis Ip, CFA (852) 2848 4068 Domestic NEV demand supported by policies and Tesla’s expansion
[email protected] Strong 2Q20 guidance with 2Q20 net profit up 2.0-3.4x YoY Anna Lu, CFA (852) 2848 4465 Upgrading to Outperform (2) from Hold (3); lifting TP to HKD29
[email protected] What's new: Ganfeng’s share price has risen by only 4% since the start of Forecast revisions (%) April, but we see catalysts emerging, including: 1) supportive NEV policies, Year to 31 Dec 20E 21E 22E and 2) Tesla’s development in China, which will likely support recovery of Revenue change - 8.0 24.7 Net profit change - 11.2 30.7 its share price despite its weak 1Q20 results (see our memo). We upgrade Core EPS (FD) change - 11.2 30.7 it to Outperform (2) with a TP of HKD29 on 3.5x 12-month forward PBR. Source: Daiwa forecasts What's the impact: Supportive NEV policy and Tesla’s expansion. Share price performance We believe the enactment of a series of positive NEV policies (see P.2) will (HKD) (%) reinforce mainland investors’ interest in EV-related names, and we look for 37 295 more NEV policies (which fit “New Infrastructure” theme of Chinese 29 234 Government, also see P.2) to come during Liang-hui.