Citigroup has released a research report stating that the lithium and battery materials sector has emerged from its difficulties since the second half of 2025, primarily benefiting from robust demand.

Considering the sustained strengthening of demand confidence, coupled with intermittent supply disruptions, the bank remains optimistic about lithium prices, believing they could test the level of 250,000 yuan per ton within this year, potentially between August and September.

Following recent adjustments in Chinese lithium stocks due to concerns that high prices might dampen demand, Citigroup has upgraded its preference for lithium stocks, believing they will outperform other segments of the battery supply chain when prices rise.

The bank has updated its preference ranking across the entire value chain, with the latest order being: lithium > cathode materials > batteries > electrolyte > separators > battery components > anode materials.

The bank's top picks include Ganfeng Lithium Group Co.,Ltd., Contemporary Amperex Technology Co., Ltd., Hunan Yuneng New Energy Battery Material Co., Ltd., EVE Energy Co., Ltd., and CALB Group Co., Ltd..

Ganfeng Lithium Group Co.,Ltd. (HKG: 01772)

For Ganfeng Lithium, Citigroup believes that driven by strong battery demand and increased contributions from low-cost upstream resources (such as Goulamina, Mariana, etc.), the company's cost competitiveness is improving, and it should benefit from rising average selling prices for lithium.

The lithium production volume attributable to its equity ownership is expected to grow continuously over the next 2 to 3 years, laying a foundation for long-term competitiveness.

Furthermore, the rapidly developing battery business is also expected to provide additional upside support for net profit in the coming years.

After updating its financial model, the bank has raised its net profit forecasts for fiscal years 2026 and 2027 to 8.457 billion yuan and 8.161 billion yuan, respectively, reiterating its "Buy" rating and raising the H-share target price from HK$66.7 to HK$78.12.

Tianqi Lithium Corporation (HKG: 09696)

Citigroup also noted that Tianqi Lithium is in one of the best positions to benefit from the lithium price upcycle, as its business is purely focused on the lithium sector from upstream spodumene to downstream lithium carbonate.

Rising lithium prices support Tianqi Lithium's achievement of a significant profit recovery in the first quarter of 2026 and indicate robust financial performance for the full year.

Compared to Ganfeng Lithium, Tianqi Lithium's valuation is not expensive, making it attractive to investors in the short term.

After updating its financial model, the bank has raised its net profit forecasts for fiscal years 2026 and 2027 to 6.969 billion yuan and 5.269 billion yuan, respectively, reiterating its "Buy" rating and raising the H-share target price from HK$61 to HK$68.