Tianqi Lithium: The 'Lithium King' with Mines at Home—How Genuine Is the Cyclical Turnaround?

Supplementary Risks (Non-Critical): The current forward P/E ratio of 13.58x assumes lithium prices remain stable; thus, the margin of safety is relatively thin. If SQM’s share reduction materializes, although it would bring short-term cash inflows, the long-term base for investment income would shrink. Chapter 8: Stock Price Forecast — Three Scenarios I conduct a three-scenario analysis using the formula: “2026 projected net profit attributable to shareholders × valuation multiple + PB floor.” Total shares outstanding: 1.713 billion; current share price ≈ RMB 59; market cap ≈ RMB 101.4 billion. 8.1 Optimistic Scenario (Probability: 30%) Assumptions: Lithium price stabilizes above RMB 180,000/ton; Greenbushes and CGP3 operate at full capacity; SQM investment income grows significantly; 2026E net profit attributable to shareholders: RMB 8.5–10 billion. Valuation: Forward P/E of 16–18x (reflecting optimistic cyclical recovery premium). Market cap range: RMB 136–180 billion → corresponding share price: RMB 79–105. 8.2 Neutral Scenario (Probability: 45%) Assumptions: Lithium price oscillates between RMB 120,000–180,000/ton in 2026, with a central level around RMB 150,000/ton; SQM contributes steadily; 2026E net profit attributable to shareholders: RMB 5.5–7 billion. Valuation: Forward P/E of 13–16x (aligned with the current dynamic P/E of 13.58x—the neutral range). Market cap range: RMB 71.5–112 billion → corresponding share price: RMB 42–65. 8.3 Pessimistic Scenario (Probability: 25%) Valuation Method Shift Explanation: Under neutral and optimistic scenarios, we use forward P/E based on earnings—implicitly assuming stable lithium prices and steady SQM contributions. In the pessimistic scenario, however, lithium prices fall below RMB 100,000/ton again and SQM’s returns shrink. Markets withdraw growth premiums for cyclical stocks, shifting the valuation anchor from future earnings back to book assets. Hence, we switch to a PB-floor approach (anchoring on net assets and applying low market-multiple valuations). Valuation Reference: Net assets attributable to shareholders at end-2025: RMB 42.362 billion × low valuation multiple of 1.2–1.5x (net cash structure, no debt deduction required) = RMB 5.1–6.35 billion → corresponding share price: RMB 30–37. Why 1.2–1.5x instead of lower? Historically, bottom-of-cycle PB ratios for lithium resource stocks have mostly ranged between 1.0x–1.5x. Given Tianqi’s net-cash structure, we grant a modest premium. Note: The RMB 42.362 billion net asset figure includes SQM equity accounted for under the equity method at book value—far below its current market valuation (Tianqi’s SQM stake valued at ~USD 5.289 billion, see Risk #2). Thus, even a PB of 1.0x may not represent “extreme undervaluation”; 1.2–1.5x better reflects a “cautious—not panicked”—pessimistic anchor. 8.4 Probability-Weighted Estimate Explanation: Weighting uses an approximate midpoint-based calculation (“midpoint × probability”): optimistic midpoint (RMB 92 × 30%) + neutral midpoint (RMB 54 × 45%) + pessimistic midpoint (RMB 34 × 25%) ≈ RMB 60. This is a rough directional reference—not a precise target. Because the optimistic range (RMB 79–105, width = RMB 26) is substantially wider than the pessimistic range (RMB 30–37, width = RMB 7), the distribution is right-skewed. Consequently, the reasonable fair value leans more toward RMB 55–65 rather than a single midpoint. A rigorous valuation would require Monte Carlo simulation; Chapter 6’s sensitivity analysis—showing lithium-price-driven profit ranges—can serve as a more robust anchor than this simple weighted average.

Has Tianqi Lithium ‘Made It Through’?

Earlier, I detailed its pricing mechanism and structural mismatches. Now, that issue appears largely resolved: no more hoarding inventory during high-price periods or dumping stock at fire-sale prices during downturns—hence, those massive cyclical losses are unlikely to recur. As for the 74.19% gross margin at the mine level—that’s Tianqi’s true core asset. Globally, only Greenbushes achieves such a 74% lithium concentrate gross margin—top-ranked in output and lowest in cost. According to the report, Talison mined 1.81 million tons of spodumene ore in H1 and produced 738,000 tons of lithium concentrate. Others’ lithium salt plants must source ore externally; Tianqi’s lithium salt plant stands behind an exclusive mine—this explains why, at identical lithium prices, Tianqi profits while competitors barely break even. One figure in the profit statement deserves special attention: net profit of RMB 6.957 billion vs. net profit attributable to shareholders of RMB 4.242 billion—the RMB 2.715 billion difference was allocated to minority shareholders, accounting for 39% of total net profit. These minority shareholders are IGO and Albemarle. During Tianqi’s debt crisis, its debt-to-asset ratio peaked at 82%. To survive, Tianqi restructured Talison’s parent company—Wodgina—by splitting equity: Albemarle holds 49% of Wodgina, while IGO acquired an indirect stake via its investment in TLEA. Altogether, Tianqi’s actual economic interest in the world’s best lithium mine is only about 26%. Thus, Wodgina’s H1 net profit attributable to Tianqi was RMB 959 million—yet the mine earned over RMB 3 billion in half a year, with Tianqi capturing less than one-third; the rest flowed into IGO’s and Albemarle’s pockets. At this pace, annual profit leakage exceeds RMB 5 billion—a heavy price paid to survive that crisis. Truly painful. That said, everyone has a past. Without that deal, Tianqi might not have survived to today. In cyclical industries, survival trumps profitability—so this trade-off defies strict accounting. Fortunately, today’s Tianqi is no longer yesterday’s. Its debt-to-asset ratio stands at 28.46%; cash on hand: RMB 10 billion. In February, it placed over 65 million H-shares via private placement and issued RMB 2.6 billion in convertible bonds; it has also registered a RMB 6-billion debt financing instrument quota—ready to issue bonds anytime. What the founder left his daughter is a company financially immune from cornering—still, one can’t help but feel for the princess. Regarding SQM: H1 investment income recognized from SQM totaled RMB 1.407 billion—versus just over RMB 200 million in the same period last year. With soaring lithium prices, SQM’s earnings surged, and Tianqi confirmed its share (21.90% ownership) accordingly—this is the long-awaited return on the USD 3-billion acquisition. Yet SQM’s challenges have dominated headlines recently. Its Chilean litigation ended in final adverse judgment. As detailed in my earlier article “Tianqi Lithium Loses a Stronghold,” SQM and Chile’s state-owned copper giant Codelco agreed on a joint venture: from 2025 to 2030, Codelco receives 70% of JV profits; starting in 2031, its share rises to 85%. The JV is now operational under the new name “Nova.” In other words, SQM is entering its final golden window—higher lithium prices mean higher investment income for Tianqi over the next two years—but post-2030, that income will be slashed by two-thirds.

SQM (NYSE:SQM): Affordable Growth Stock With Accelerating Forward Earnings

Jul 30, 2026

SQM is highlighted as an attractive growth investment due to strong historical EPS and revenue growth, despite mixed financial health indicators. Its accelerating earnings outlook suggests current valuations may not fully reflect future potential.

ChartMill

2026-03-26

Sociedad Química y Minera de Chile Stock: A Key Player in Lithium and Specialty Plant Nutrition

2026-03-27

Strong Lithium Demand Spurs Growth for SQM in FY25

2026-04-04

SQM Raises Dividend Payout Target to 50% of Net Income Amid Valuation Review

2026-04-08

SQM: Strong FY2025 Results Driven by Lithium, with Robust ESG Targets and Global Expansion

2026-04-09

Did Upgraded Lithium Earnings Forecasts Just Shift SQM’s Investment Narrative?