Tianqi Lithium's Profit Rebound: A Temporary Fix or Sustainable Turnaround?

Tianqi Lithium Corporation marked a pivotal shift in early 2025, posting its first net profit in five quarters with a modest CNY 104.27 million (USD 14 million) gain in Q1 2025—compared to a staggering CNY 3.897 billion loss in the same period a year earlier. While this turnaround signals resilience in one of China’s largest lithium producers, the path forward remains fraught with industry-wide challenges. Let’s dissect the drivers of this rebound and assess whether Tianqi’s recovery is a fleeting reprieve or a sign of enduring strength.

Ask Aime: "Is Tianqi Lithium's Q1 2025 profit a sign of enduring strength?"

The Turnaround in Q1 2025: A Delicate Balance

The Q1 profit reversal hinged on two critical factors: operational adjustments and improved performance from its major associate, Sociedad Química y Minera de Chile S.A. (SQM). First, Tianqi resolved a long-standing pricing cycle mismatch that had inflated production costs. Its subsidiary, Windfield Holdings, shortened the pricing cycle for lithium ore supplied by Talison Lithium, aligning procurement costs with current market rates. This adjustment eliminated a major drag on profitability, as prior quarter-end reporting had artificially inflated costs.

Second, SQM’s recovery played a pivotal role. In 2024, a tax dispute ruling had slashed SQM’s earnings, but its Q1 2025 performance rebounded, allowing Tianqi to recognize higher investment income. This contrasted sharply with 2024, when SQM-related losses contributed significantly to Tianqi’s net deficit.

However, revenue stagnation underscored underlying vulnerabilities. Tianqi’s Q1 revenue dipped marginally to CNY 2.584 billion—a 0.02% decline year-over-year—highlighting the pressures of a lithium market grappling with oversupply and falling prices.

Key Drivers of the Recovery

1. Pricing Cycle Realignment: By synchronizing lithium ore procurement prices with sales timelines, Tianqi eliminated a key source of financial volatility. This adjustment reduced inventory valuation discrepancies, a problem that had plagued the company for years.

2. Operational Efficiency Gains: Capacity expansions at domestic production facilities, coupled with technological upgrades, boosted output of lithium compounds and derivatives. For instance, the Zhangjiagang plant in Jiangsu ramped up production of lithium hydroxide, while the Chongqing lithium metal project added niche capacity.

3. SQM’s Turnaround: SQM’s improved performance—driven by higher lithium sales volumes and resolved tax issues—contributed meaningfully to Tianqi’s investment income. Analysts estimate SQM’s Q1 2025 earnings rose by 15% year-over-year, directly benefiting Tianqi’s bottom line.

Lingering Challenges in the Lithium Market

Despite the profit rebound, Tianqi faces a host of headwinds:

• Oversupply and Pricing Pressure: Lithium carbonate prices hovered near historic lows in early 2025, dropping to CNY 74,000/mt by March from CNY 75,100/mt in January. Analysts project global lithium supply to outpace demand by 12% in 2025, exacerbating margin pressures.
• Competitor Struggles: Peer Ganfeng Lithium posted a narrower but still significant net loss (CNY 356 million vs. CNY 439 million in Q1 2024), underscoring the sector’s fragility. Both companies cite weak demand and fair-value losses on financial assets as key drags.
• Downward-Revised Growth Projections: Analysts slashed Tianqi’s 2025 revenue growth forecast to just 1.1%, down from a historical average of 37%. The broader lithium industry is expected to grow at 16%, suggesting Tianqi is falling behind its peers.

Smart Scores further highlight concerns: while Tianqi’s “Value” and “Dividend” metrics remain strong, its “Growth,” “Resilience,” and “Momentum” scores lag, signaling skepticism about its ability to sustain growth amid industry volatility.

Conclusion: A Fragile Foundation for Long-Term Success

Tianqi’s Q1 profit turnaround is undeniably a positive milestone, achieved through operational discipline and SQM’s recovery. However, the company’s future hinges on factors largely outside its control: lithium prices, supply-demand dynamics, and geopolitical risks.

Key data points reinforce this duality:
- Profitability: Net profit jumped from -CNY 3.897 billion to +CNY 104 million, but this improvement relied heavily on SQM’s rebound and cost adjustments—not organic revenue growth.
- Valuation Uncertainty: Analysts’ price targets range from CNY 21.00 (bearish) to CNY 55.00 (bullish), reflecting deep divides over Tianqi’s trajectory.
- Industry Context: With lithium prices near lows and oversupply persisting, even a 1.1% annual revenue growth target appears optimistic unless demand surges.

In the short term, Tianqi has stabilized its finances. Yet without a lithium price recovery or a structural shift in the market, this profit rebound may prove fleeting. Investors should weigh the company’s operational improvements against the sector’s headwinds—and recognize that Tianqi’s success in 2025 and beyond will be as much about external conditions as internal execution.

For now, the verdict remains open: Tianqi has turned a corner, but the road ahead is still uncertain.