The Latest: Tianqi Lithium Corp. (9696.HK; 002466.SZ) announced on Wednesday it expects to report its net profit soared between 1,011% and 1,131% to between 23.1 billion yuan ($3.4 billion) and 25.6 billion yuan in 2022.

Looking Up: Tianqi Lithium and its peers are benefitting from soaring prices and sales for the metal that is a key component for lithium batteries used in electric vehicles (EVs).

Take Note: Lithium prices have already begun trending downward this month following huge run-ups over the last two years. That means Tianqi’s huge profit growth is unlikely to last and its profits could even start to slump if lithium prices continue dropping.

Digging Deeper: Tianqi Lithium is one of China’s two largest lithium producers. It owns around a quarter of SQM, a Chilean company that is the world’s second-largest lithium producer. Tianqi Lithium was struggling with huge debt and loss-making operations until the boom in lithium prices that helped to turn the company profitable in the first half of 2022. The Shenzhen-listed company raised HK$13.5 billion ($1.7 billion) in a secondary listing in Hong Kong last July, and said it would use more than 70% of the proceeds to repay debt to ease its liquidity pressure.

Market Reaction: Tianqi’s stock was up 1.7% at HK$65.6 by the midday trading break on Thursday. It now trades near the lower range of its 52-week range.  

Reporting by Chan Ka Po

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