0703: How Retail Investors View Interim Reports

Yesterday's review felt that there should be a rebound today, specifically referring to the tech sector. The rebound came today, but it was still disappointing. [Taoguba]
During the session, the ChiNext and STAR 50 once rose by over 2%, but by the close, one was flat and the other was in the red. Yesterday's false rally followed by a sell-off, and today's surge that lacked momentum before retreating in the afternoon, has shaken many who believed in tech, including myself.
There are 16 stocks in the consecutive board, and no pure tech stocks can be seen, except for two that announced涨停 (a cross-border stock Hengshang that acquired storage, and a Zhongtong that had its special treatment removed).
Some say that today's tech sector's surge and subsequent retreat was due to rumors, specifically that the performance of the tech leader Zhongji InnoLight missed expectations. After the news spread, capital stopped pushing forward, so in the afternoon, robotics continued its morning offensive, aerospace also rose, along with precious metals, securities, and pharmaceuticals, giving a sense that when one giant falls, everything else flourishes. The funds flowing out of tech hardware today largely entered robotics and aerospace.
The tone of online memes has also changed, from two months ago of "you should stand in the light, not just stand there" to tonight's "question the light, understand the light, believe the light, become the light, hold the light, lose it all."
Tonight, the A-share storage sector finally saw its first mid-term report pre-disclosure from Jiang Bo Long. The numbers look explosive, and some self-media headlines are equally explosive: "Storage leader's performance surges 600 times!"
Is Jiang Bo Long even a leader? But combined with yesterday's announcement from Beijing Junzheng that due to continuous price increases, gross margins across quarters will grow sequentially, and looking at South Korea's KOSPI200 index, which had a morning circuit breaker on declines and an afternoon circuit breaker on gains, my first reaction was that mid-term reports are indeed the strongest foundation for the tech sector. The main logic behind sticking with tech during these recent adjustments is exactly this.

Then, I immediately saw an analysis from a professional who believes Jiang Bo Long's mid-term report signals a top. His basis is that the 600-fold increase is illusory: one reason is that last year's performance was too poor, creating a low base; another is that the balance sheet shows inventory of 17.96 billion yuan at the end of Q1, with a large portion of performance contributed by low-cost inventory hoarded in the past; another reason still comes from the balance sheet, with net operating cash flow of -2.88B yuan in Q1, meaning the book profit is essentially still warehouse inventory. The main skepticism is that the ChiNext board does not require mandatory mid-term report disclosure, so why did Jiang Bo Long choose to release it now? One reason is to support the recently approved private placement, and another is to create momentum for the already-filed Hong Kong listing application. I am not a finance major, so I cannot question his skepticism, but I remember a reminder about how retail investors should read financial reports: don't just look at earnings, but also consider cash flow. Companies with negative cash flow often hide risks, especially those that raise funds through private placements to supplement cash flow. Coincidentally, Jiang Bo Long's approved private placement on June 12 raised 3.7 billion yuan, with 2.6 billion for expansion and 1.1 billion for cash flow supplementation.
Jiang Bo Long, which has already released its announcement, has impressive performance numbers but faces skepticism. The leader Zhongji InnoLight, which has not yet released its report, has negative rumors about missing expectations. In fact, negative rumors about Zhongji InnoLight have appeared multiple times recently. Small rumors in the A-share market are both loved and hated—some are early spoilers, while others are malicious smears. Many early spoiler rumors, after various clarifications and explanations, end up becoming reality, such as the rumor about Nvidia cutting prices. After an official vague explanation as a denial, Samsung and SK Hynix later became circumstantial evidence.
If Zhongji InnoLight's performance really misses expectations, the meme from tonight about "holding the light and losing it all" will come true.

As a retail investor, we lack both professional predictive ability and the power to influence the market. What we can do is risk management. If there are doubts about a theme or a stock, we should stop.
When you invest tens of thousands or hundreds of thousands of hard-earned money into a stock, you must operate with firm confidence or clear expectations. If there is even a hint of doubt, giving up might be the best outcome.
Now is the mid-term report window, and understanding performance announcements is crucial. Misreading or misjudging can have severe consequences. For such professional matters, retail investors can seek help from tools like Long Xia or Dou Bao, but they must write their questions clearly. Here is a standard template:

Please, as an experienced financial analyst, analyze the company's financial report data from the following perspectives using neutral and objective language:

1. The company's core advantages and hidden risks
2. Valuation reasonableness
3. Comparison with the industry
4. Potential risk points
   Finally, provide judgments under "conservative/neutral/positive" investment attitudes.

Yesterday, Salt Lake Co., Ltd. released its performance report. Using this template to ask questions, the answer received is as follows:

I. Core advantages and hidden risks of the company
Advantages: Dual main businesses of potassium and lithium with both volume and price increases. In the first half, sales of potassium chloride were 2.2473 million tons and lithium carbonate sales were 39.1k tons; production cost of potassium chloride is about 1,200 yuan/ton, and lithium carbonate cost is 31,000-40k yuan/ton, with cost advantages building a deep moat; Q1 asset-liability ratio was only 15.85%, with a stable financial structure.

Hidden risks: Q2 net profit growth rate was less than 10% quarter-on-quarter, even slightly declining on the lower bound; Q2 lithium carbonate sales were about 22.3k tons, compared to the estimated production of about 29.9k tons in the same period, meaning some new production capacity turned into inventory.

PS: Note that here it found the company's 10k tons of lithium carbonate inventory, wondering if they are holding it to sell when prices rise.

II. Valuation reasonableness
Based on the closing price of about 30 yuan on July 3 and total market cap of about 159.7 billion yuan, the dynamic P/E ratio is about 13.19 times. Institutions predict average net profit of 8.594-39.1k yuan in 2026, corresponding to a P/E of 16-19 times. Kaiyuan Securities predicts EPS of 2.07/2.41/2.79 yuan for 2026-2028, and the current stock price corresponds to a P/E of about 14.5-17.5 times, which is within a reasonable range for cyclical products.

III. Comparison with the industry
Asia Potassium International's 26Q1 net profit attributable to parent was 533 million yuan (up 38.5% YoY), with revenue of 40k yuan; Zangge Mining's 26Q1 net profit attributable to parent was 1.57 billion yuan (up 110.6% YoY), with investment income mainly from Julong Copper. Salt Lake Co., Ltd.'s first-half net profit was 6-6.3 billion yuan, far larger than peers, with a domestic potassium fertilizer market share of over 35% and domestic supply share of over 60%, solidifying its leading position.

IV. Potential risk points
Product price fluctuations: Lithium carbonate experienced a rollercoaster of "sharp rise - peak - decline" in the first half, with industrial-grade lithium carbonate dropping 12.57% in June; potassium fertilizer may face price pressure if price caps are imposed or global oversupply occurs.

Shipment pace and inventory: Q2 lithium carbonate prices were at a yearly high, but shipments were restrained; if prices fall later, inventory faces impairment risk.

PS: This echoes the earlier mention of 10,000 tons of inventory.

Intra-industry competition: The market suspects that Qinghai Huixin continues to expand similar businesses, posing a risk of intra-industry competition.

Views under different investment attitudes

Conservative type: Cyclical product prices are at a high level, Q2 already showing signs of fatigue quarter-on-quarter, institutional profit forecasts are wide-ranging (6.26 billion-22.3k yuan), uncertainty is high, so it's better to wait and see.

Neutral type: The dual main businesses of potassium and lithium have sustained prosperity and outstanding cost advantages, but product price volatility and slowing Q2 sales need continuous tracking; attention can be paid to demand and price trends in the peak season of the second half.

Positive type: The first half already achieved about 70% of the lower bound of the full-year institutional profit forecast; the 40k-ton lithium salt project is running at full capacity, and the consolidation of Minmetals Salt Lake contributed incremental growth; if potassium and lithium prices remain high, the full year may exceed expectations, with the average institutional target price at 35.95 yuan.

Based on this result, if you are a conservative or steady style, you should stop following this stock. If you are an aggressive type willing to take higher risks, the stock is currently at a relatively low level, with significant room to the institutional target price, so you could consider making a bet.

The above is purely sharing a method and technique for understanding mid-term reports. I have no personal interest in this stock or theme.

Today's operations:

Today, the focus of positions shifted to robotics. Aerospace was not touched yet, mainly due to concerns about performance. SpaceX's listing failed to drive aerospace, and currently, the only thing that can boost it is a successful rocket recovery, which obviously has great uncertainty.
I haven't given up on tech yet, but I need to respect the market's choices.
In previous reviews, there were two views: one was that the market would start over, with new main lines built on the ruins; the other was a dumbbell-shaped market, with tech and non-tech dual main lines advancing together. Personally, I hope for the latter, so that there won't be huge fluctuations. This week's market seems to be moving toward the latter.