Tianqi Lithium's 1Q26 results significantly beat expectations, with rising lithium prices as the core driver
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Tianqi Lithium's 1Q26 results significantly beat expectations, with rising lithium prices as the core driver
Morgan Stanley maintains its Overweight rating and Rmb83 target price on Tianqi Lithium, believing strong lithium prices, SQM income, and low-cost inventory will continue to support 2026 earnings.
- 1Q26 net profit was Rmb1.7-2.0bn, significantly higher than Rmb104mn in 1Q25 and above Morgan Stanley's expectations.
- Recurring net profit was Rmb1.6-1.96bn, higher than Rmb44.4mn in 1Q25 and Rmb288mn in 4Q25.
- Management attributed the strong results to a sharp rise in lithium prices, with 1Q26 lithium prices at about Rmb145k/t LCE, up Rmb59k/t quarter on quarter.
- The report expects 2Q26 lithium prices to be about Rmb153k/t, up another roughly Rmb8k/t quarter on quarter, and these tailwinds are expected to continue supporting full-year earnings.
Report interpretation
Overview
This report is Morgan Stanley's earnings review of Tianqi Lithium Industries Inc. It believes the company's 1Q26 results were strong, mainly benefiting from a significant rise in lithium prices, robust demand, higher SQM investment income, low-cost inventory, and the pricing lag effect during the lithium price upcycle.
Core views
The core view is that Tianqi Lithium's earnings elasticity is being amplified by the rebound in lithium prices. Both 1Q26 net profit and recurring net profit improved significantly, and the report expects 2Q26 lithium prices to continue rising quarter on quarter. Morgan Stanley maintains its Overweight rating, believing the current target price still offers moderate upside relative to the closing price.
Analysis framework
The report assesses Tianqi Lithium's A-share and H-share target prices by combining the comparison of first-quarter results with market expectations, lithium and LCE price trends, the company's inventory position, SQM investment income, cost risks, and the DCF valuation framework.
Methodology notes
Discounted cash flow valuation
The base case uses a DCF model, assuming a WACC of 11.5% and a terminal free cash flow growth rate of 2.0% after the 2026-2033 forecast period.
A-H share premium
The A-share target price assumes an A-H premium of 29% and uses an HKD/RMB exchange rate of 0.88.
Institutional earnings model
Unless otherwise specified, major financial metrics are based on the Morgan Stanley ModelWare framework and Morgan Stanley Research estimates.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Tianqi Lithium Industries Inc. (002466.SZ)Core covered name
- Strengths
- Rising lithium prices, SQM investment income, low-cost inventory, and pricing lag jointly support earnings.
- Weaknesses
- Earnings are highly sensitive to the lithium price cycle, and the cost side may be affected by diesel supply in Australia.
- Comparison
- The report maintains the stock rating at Overweight, with an Attractive industry view and a target price implying about 24% upside.
- Risks
- Lithium prices below expectations, upstream resource output growth below expectations, and midstream conversion output growth below expectations.
- Tianqi Lithium Industries Inc. (9696.HK)H-share mapping of the same company
- Strengths
- Also benefits from the company's lithium resources and lithium salt conversion businesses, as well as earnings improvement driven by rising lithium prices.
- Weaknesses
- Valuation is affected by the A-H price gap, exchange rates, and Hong Kong market risk appetite.
- Comparison
- The H-share target price historically rose to HKD73.1 on April 20, 2026; the A-share target price is Rmb83.00.
- Risks
- Lithium prices and output coming in below expectations, as well as a wider market valuation discount.
Key data
- 1Q26 net profitRmb1.7-2.0bnAbove Morgan Stanley expectations; 1Q25 was Rmb104mn.
- 1Q26 recurring net profitRmb1.6-1.96bn1Q25 was Rmb44.4mn and 4Q25 was Rmb288mn.
- 1Q26 lithium priceRmb145k/t LCEUp Rmb59k/t quarter on quarter.
- 2Q26 lithium price expectation~Rmb153k/tExpected to increase by about Rmb8k/t quarter on quarter.
- End-2025 inventory206kt SC; 7.7kt LCEThe report believes low-cost inventory helps amplify earnings elasticity.
- Target priceRmb83.00Based on the April 20 closing price of Rmb66.82, implying 24% upside.
Impact & implications
The report has a positive implication for the company's short- to medium-term earnings: if lithium prices continue to rise, the company's upstream resources, midstream conversion, and inventory cost advantages will jointly enhance earnings elasticity; however, if tight diesel supply in Australia persists, it may raise costs and disrupt mine production.
Risks
- Lithium prices below expectations would directly pressure earnings and valuation.
- Upstream resource output growth below expectations may weaken earnings elasticity on the resource side.
- Midstream conversion output growth below expectations may affect sales and profit realization.
- Tighter diesel supply in Australia may raise costs and affect mine production if traffic through the Strait of Hormuz does not recover quickly.
- Morgan Stanley discloses business relationships with the covered company, and investors should treat this research as only one factor in making investment decisions.
What to watch
- Whether 2Q26 lithium prices reach or exceed the expected level of about Rmb153k/t.
- Changes in SQM investment income's contribution to Tianqi Lithium's profits.
- The pace of low-cost inventory depletion and its support for gross margin.
- Whether Australian diesel supply and mine production are disrupted.
- Whether upstream resource and midstream conversion output growth meet expectations.