Incident 1: CPC released NEV sales data for June 2022, including retail sales of 532,000 units, up 130.8% year on year and 47.6% month on month; domestic NEV retail sales in January-June were 2.248 million units, up 122.5% year on year.
Incident 2: The China Automobile Power Battery Industry Innovation Alliance released data showing that in January-June 2022, the installed capacity of power batteries in China was 110.12 GWh, an increase of 109.8% over the previous year. Among them, the installed capacity in June was 27 GWh, up 143.3% year on year and 45.5% month on month.
Incident 3: The company announced that its wholly-owned subsidiary, Tibet Nord, plans to buy 5% of Dawson's shares (603800.SH) for 250 million yuan. At the same time, it was disclosed that a strategic cooperation agreement was signed with Dawson Corporation.
Copper foil for lithium batteries is supported by a high boom in new energy vehicles and power batteries. Copper foil for lithium batteries is the negative electrode fluid collector in lithium batteries and is an important component that affects the overall performance of lithium batteries. Downstream applications of lithium battery copper foil focus on lithium-ion batteries. Lithium-ion power batteries are mainly used in new energy vehicles. In 2022, domestic new energy passenger vehicle sales continued to grow rapidly, and global power battery shipments grew significantly. We expect that the lithium battery copper foil market size will also continue to grow at a high rate. The company is a leading lithium battery copper foil company in China. With the rapid development of new energy vehicles and power batteries and the rise in downstream demand, lithium battery copper foil products are expected to maintain rapid growth.
Production capacity continues to expand, processing costs remain high, and quantitative profits are expected to rise sharply. The company will have a copper foil production capacity of 43,000 tons by the end of 2021, including 35,000 tons/year at the Qinghai copper foil base and 80,000 tons/year at the Huizhou copper foil base. According to the company's 2021 annual report, the Qinghai base will have a production capacity of 15,000 tons/year in 2021, with a planned production capacity of 15,000 tons/year. After completion, the total production capacity will reach 65,000 tons/year; mass production capacity of 12,000 tons/year at the Huizhou base has already begun; the company has built a new 100,000 ton production capacity base in Huangshi, Hubei. Once all the new production capacity of the above three production bases is completed, the company's future production capacity will reach 185,000 tons/year. According to investor exchanges announced by the company, the company's overall production capacity could reach 70,000 tons by the end of 2022. Because the expansion of copper foil production requires a high investment scale and high investment intensity for equipment, about 800 million yuan/10,000 tons. Core equipment manufacturers rely on imports, such as cathode rollers, etc., overseas equipment manufacturers have a long delivery cycle, the additional capacity cycle is about 1.5-2 years, and the new production capacity of leading companies is limited, we expect that the utilization rate of the company's new production capacity will remain at a high level. As demand for power batteries increases, lithium battery copper foil will still be in short supply, and its processing costs are expected to remain high. Among them, ultra-thin copper foil enjoys higher processing fees and technical premiums, and the company has a technical advantage over extremely thin copper foil. As the proportion of 4.5 μm and 6 μm product shipments increases, the company is expected to experience a sharp rise in quantitative profit.
Strategic cooperation with Dawson Co., Ltd. supports the implementation of production capacity and consolidates the foundation for growth. The company signed a strategic cooperation agreement with Dawson Co., Ltd.: 1) Dawson Co., Ltd. will give priority to meeting the equipment needs of NORD's stock's production expansion plan to guarantee NORD's production capacity equipment and production cycle requirements; 2) The two parties will jointly carry out technical cooperation in the field of lithium battery copper foil, including filtering equipment, 3μm ultra-thin copper foil products, and composite copper foil products. Dawson Co., Ltd. announced that it plans to acquire 51% of Hongtian Technology's shares. Hongtian Technology is one of the few domestic companies that has achieved mass production of lithium battery copper foil cathode rollers. Currently, the supply of copper foil for lithium batteries is tight. If Dawson Co., Ltd. completes the acquisition of shares in Hongtian Technology, this strategic cooperation will effectively support the smooth implementation of the company's new production capacity and lay a solid foundation for maintaining rapid growth in production and sales.
Profit forecast: As a leading domestic lithium battery copper foil manufacturer, the company has high growth, strong performance certainty, and broad prospects for future development. The company's new production capacity has been completed and put into operation one after another, and the proportion of extremely thin copper foil shipments has increased, which is expected to be accompanied by the boom in industries such as new energy vehicles and power batteries. We expect the company's revenue for 2022-2024 to be 72.42, 110.80 billion, and 13.705 billion yuan respectively, net profit of 868, 1286 and 1,542 billion yuan respectively, corresponding EPS of 0.62, 0.92, 1.10, and corresponding PE multiples of 18x, 12x, and 10x respectively. Give it an “increase in holdings” rating.
Risk warning: sales of new energy vehicles fell short of expectations; power battery shipments fell short of expectations; production progress of new production capacity fell short of expectations; increased competition led to price wars; systemic risks.