The company is the second independent third-party power battery company in China. Founded in 2015, the company is mainly engaged in power batteries and energy storage battery products. In 2019, the company carried out strategic restructuring and transformation, and the products began to focus on the downstream passenger car market, and achieved rapid development, becoming the only one of the top 10 power battery enterprises in China with a year-on-year growth rate of more than 100% from 2018 to 2021. 2022H1 power battery global market share of 4.5%, ranking seventh; domestic market share of 7.6%, the industry ranked third, in the independent third-party power battery companies ranked second.
The sales of new energy vehicles have increased steadily, and the pattern of power batteries has shown a diversified trend. Electrification is the long-term main line of the automobile industry, and the related points policies and car purchase subsidies around the world promote the transformation of supply and demand to new energy vehicles. With the accelerated promotion of middle and high-end electric vehicles, the increase in the carrying capacity of bicycles also promotes the considerable growth in the demand for power battery shipments. With the rapid expansion of production in the power battery industry, the supply capacity of second-tier enterprises is getting closer to that of the industry leaders. Downstream car companies actively introduce new suppliers to improve the reliability of the supply chain and enhance the bargaining power of the upstream. Under the trend of this industry, battery companies such as China New Airlines and Yiwei Lithium Energy are expected to usher in rapid development opportunities.
The products have both high safety and cost performance, and work closely with high-quality customers to achieve rapid growth. The company is the first to launch the medium-nickel high-voltage scheme, which provides optional products with both cost competitiveness and safety for the ternary battery market.
The company keeps up with the industry trend in lithium ferromanganese phosphate and sodium battery. Before the formation of large-scale production capacity and market reputation, the company opens the market situation through highly competitive product pricing and forms a close strategic cooperation relationship with customers. At present, the company's main power battery customers include Guangzhou Automobile, XPeng Inc., Zero, Changan, Dongfeng, Geely, Xiamen Jinlong and other car companies, and continue to provide power batteries for customers' latest main models.
Looking to the future, production capacity after listing is expected to expand rapidly and gradually open overseas markets. The company's capacity utilization rate remained high from 2019 to 2021, and the manufacturing cost is currently at a low level in the industry. The company's long-term planned production capacity exceeds 500GWh, and it is expected to rely on supply capacity to stabilize customer share. The company cooperates with overseas N customers, a German car company and the Smart brand, and customer diversification is expected to improve profitability.
Profit forecast and valuation: the company is a new force in the rapid rise of the power battery industry. After listing and financing, the production capacity can be expanded at a high speed, the customer structure is diversified, and the market share is expected to increase steadily. We estimate that the company's net profit from 2022 to 2024 will be 4.9x226,000,000 yuan, a year-on-year increase of 246pm 366max, and earnings per share will be 1.27max 1.99 yuan, respectively. Combined with absolute and relative valuations, we believe that the reasonable value of the company's shares is between 37 and 40 yuan (HK $40.9-44.2), which is a 16% premium to the company's current share price. For the first time, coverage gives an "overweight" rating.
Risk tips: electric vehicle sales are not as expected; industry competition aggravates the risk; customer development is not as expected; capacity investment is not as expected; patent litigation risk.