Leading aluminum heat transfer materials first released water-cooled plates for power batteries, and companies are entering a new era of development due to high industry demand. The company has been deeply involved in aluminum sheet and strip for 30 years, and is the first batch of enterprises to complete the localization of aluminum heat transfer materials.
Beginning in 2016, the company actively developed orders for cooling materials for the new energy sector, and successfully became the main supplier of water-cooled plate materials for new energy power batteries around 2018, such as BYD and Ningde Shidai, occupying a central position in the market segment. Demand for water-cooled plates for new energy power batteries grew rapidly in 2021. The company's revenue in the new energy sector accounted for 17%, and further increased to 23% in Q1 2022.
The rise in industry processing fees and the increase in the profit margin of the company's production capacity have led to a significant improvement in profitability. Meanwhile, in 2021, the company and Jiangxi Yueda will build a joint venture to produce 100,000 tons of recycled aluminum per year, further reducing costs and increasing efficiency. The company currently has a production capacity of 180,000 tons, and production capacity will increase to 240,000 tons after the technical reform is completed in Q3 2022.
“Kirin” began the first year of high-rate fast charging batteries. The breakthrough structural innovation of water-cooled plates opened a new era of aluminum brazing composites. The demand for CAGR in 2022-2025 was about 42%. Ningde released “Kirin”
Through structural innovation, the battery integrates the water-cooled plate from a horizontal single-sided working condition to a vertical structure, greatly increasing the installed capacity of the water-cooled plate. In the future, long battery life and ultra-fast charging will place higher demands on battery thermal management systems. The corresponding consumption of water-cooled board bikes is expected to continue to increase. It is estimated that in 2022-2025, the demand for aluminum brazed composites for new energy vehicles will increase from 206,000 tons to 545,000 tons, and CAGR will reach 38%. Among them, the demand for water-cooled panels for power batteries is expected to increase from 101,000 tons to 287,000 tons, and CAGR will reach 42%.
Products are highly customized, long production processes and certification cycles raise barriers to entry into the industry. Aluminum heat transfer composites have the characteristics of small overall scale and high industry concentration. High product customization and high SKU production models create high barriers. Long-process production and multiple cutting processes place high demands on the ability of enterprises to control material yield. Currently, domestic aluminum brazing composite material suppliers mainly include Grangis, Yinbang Co., Ltd., Huafeng Aluminum, etc., while there are even fewer companies with supply capacity in the wide-width EV water-cooled plate segment. The product certification cycle of more than half a year poses an extremely high qualification certification barrier for new entrants.
The product has been widely recognized by leading downstream EV companies, and Ningde's 360,000-ton “big order” further supports the high demand boom. The company has been deeply involved in the automotive aluminum heat transfer materials industry for many years, with the automotive sector accounting for 73% of revenue in 2021. Traditional cars have become suppliers to world-renowned auto parts companies such as France's Valeo Group. New energy vehicle power battery materials have been supplied directly or indirectly in batches to well-known enterprises such as Ningde Shidai, BYD, Great Wall, and Volkswagen. In April 2022, the company signed a memorandum of cooperation with Ningde Times. It plans to directly or indirectly supply no less than 360,000 tons of water-cooled plate materials to it during the 5-year period 2022-2026, locking in the main share of future industry growth, and the market share of leading market segments is expected to increase further.
Profit forecast: We expect the company's net profit from 2021-2023 to be 2.90, 481, and 581 million yuan respectively. The corresponding PE is 37.7, 22.7, 18.8 times, and PB is 6.1, 4.8, and 3.9 times, respectively.
The first coverage gave a “buy” rating.
Risk warning: risk of fluctuations in raw material prices, risk of demand for new energy vehicles falling short of expectations, etc.