Lygend Resources & Technology (2245) H1 2023 earnings summary

Executive summary

• H1 revenue fell 7.0% YoY to RMB9,284.1m; gross profit declined 49.2% to RMB1,567.4m and profit fell 71.1% to RMB662.0m, reflecting lower nickel and cobalt prices and FX losses.

• Attributable profit was RMB338.4m, down 74.9% YoY; basic and diluted EPS was RMB0.22 versus RMB1.02.

• Production capacity expanded as hydrometallurgy phase II reached full capacity and all eight phase I RKEF lines entered operation; phase III HPAL construction progressed.

Financial highlights

• Revenue was RMB9,284.1m versus RMB9,978.3m YoY; gross profit was RMB1,567.4m versus RMB3,084.2m, with gross margin at 16.9% versus 30.9%.

• Profit before tax decreased 73.4% to RMB636.2m; profit for the period was RMB662.0m versus RMB2,289.6m, including a RMB25.8m income tax credit versus RMB102.9m expense.

• Other operating expenses rose to RMB327.8m, including RMB162.0m investment losses on nickel-price-linked revenue and a RMB136.7m increase in net FX losses; finance costs rose to RMB232.5m.

Outlook and guidance

• Priorities include orderly construction of phase III HPAL and phase II RKEF, with gradual capacity release; KPS phase II RKEF construction and equipment procurement were progressing as planned.

• Planned initiatives include more R&D investment, a new R&D center, expanded upstream nickel resource channels, and development of integrated downstream production bases and industrial-park infrastructure in Indonesia.

• Management expects nickel demand to benefit from NEV adoption and wider battery use, while lower ferronickel prices may support stainless-steel demand.