Morgan Stanley expects Ganfeng Lithium (01772) to encounter ongoing profit headwinds in the third quarter, maintaining its HK$14.3 target price and "reduce" rating. The bank's analysis indicates mainland China's planned lithium production growth continues to outpace demand expansion in July. Unless substantial production cuts materialize in regions like Jiangxi's Yichun, the recent price rebound appears unsustainable.

Ganfeng Lithium anticipates an interim net loss between RMB300 million and RMB550 million—a notable improvement from the RMB760 million net loss recorded during the same period last year. This suggests second-quarter performance landed between an RMB56 million profit and an RMB214 million loss, compared to a RMB356 million loss in Q2 2022.

Additionally, the company projects an interim recurring net loss of RMB500-950 million, contrasting with last year's RMB160 million recurring loss. This implies Q2 recurring net losses reached RMB258-708 million, versus a RMB242 million recurring loss in the prior-year quarter. Morgan Stanley views these Q2 results as broadly in line with expectations, though structural oversupply concerns persist.