On Wednesday, Daiwa Securities initiated coverage on Ganfeng Lithium (HK:1772) Group Co Ltd (002460:CH) with a rating of Underperform and set a price target of RMB37.00. The new rating underscores the firm's cautious stance on the company's near-term prospects in the context of global lithium prices.
Daiwa Securities based its assessment on several financial metrics, including the price-to-book ratio (PBR) comparisons with Ganfeng Lithium's global tier-1 peers. The analyst pointed out that while Ganfeng's peers are trading at 1.3-2.0 times their expected 2025 high PBRs, Ganfeng Lithium has averaged a PBR of 3.9x over the past six years. Consequently, the firm has assigned a 12-month forward PBR of 1.6x to Ganfeng Lithium.
The analyst's negative outlook on global lithium prices between 2024 and 2026 influenced the decision to set the price target. However, the firm maintains a positive view on Ganfeng Lithium's long-term business growth within the lithium sector. This perspective is factored into the price target, which is based on a projected 2025 book value per share (BVPS) of CNY23.
Daiwa Securities also outlined a key upside risk for Ganfeng Lithium, which could be a higher-than-expected average selling price (ASP) for lithium in China. This factor could potentially provide a lift to the company's financial performance beyond the firm's current expectations.
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