Electrolyte: Brace for more downside ahead. In our sector report in December 2021, we forecasted the Chinese Electrolyte space to enjoy a favourable S/D environment in 2022, and elevated electrolyte/LiPF6 prices to sustain until end-2022 after a 307%/727% spike. However, Covid-19 lockdowns in China, plus a faster supply response from new capacity additions, have deteriorated the S/D balance and shifted early the tipping point. Electrolyte/LiPF6 prices have corrected 35%/54% from the peak in 1Q22, but we believe this is just the beginning of a downcycle. With 55/124 ktpa new LiPF6 nameplate capacities scheduled to start up in 2H22/2023, we now estimate electrolyte/LiPF6 prices to decline 55%/69% in 2H22 vs 1Q22 levels, and 42%/52% YoY in 2023. This will flip the Chinese Electrolyte players into an earnings downtrend, where we estimate the aggregate 2H22 NP to decline 11% YoY (1H22: +124% YoY).

Our new 2022/23 EPS is 26%/41% below consensus on an average.