The Zhitong Finance App learned that Xiniu Securities released a research report saying that due to (i) the rapid decline in upstream costs and product prices, and ii) the increase in NEV sales growth in the first quarter, China Innovation Aviation (03931) product sales, prices, and even profit forecasts were lowered accordingly. However, in the medium term, the bank believes that the group can still benefit from scale effects, partially offsetting the impact of falling product prices. Maintain the Group's “buy” rating and lower the target price to HK$29.5 per share. The Group achieved total revenue of 20.37 billion yuan last year, slightly lower than the bank's expectations, but the Group was ideal in terms of cost control, achieving a net profit of 690 million yuan, an increase of 521.8% over the previous year.
The main views of Xiniu Securities are as follows:
The increase in installed capacity is encouraging:
According to data, the installed capacity of China Innovation Airlines increased to 19.24 GWh last year, while the installed capacity in the first quarter of this year increased 125.8% year-on-year to 5.27 GWh. Of these, ternary batteries and lithium iron phosphate batteries each accounted for half. In particular, due to cost considerations, the penetration rate of lithium iron phosphate batteries has increased significantly, and the installed capacity of the Group's lithium iron phosphate batteries has also followed a marked increase in the industry.
The concentration of customers has been further dispersed:
China Innovation Airlines continues to expand its customer base and deepen cooperation with customers, driving the Group's share of single customer revenue to 39.5% from 51.9% in 2021, and the difference between customer concentration and peers has narrowed further. Currently, GAC (02238) is still the group's core customer. Cooperation between the Group and NIO (09866) on ternary batteries and with Hechuang Automobile on lithium iron phosphate batteries also improved significantly in the first two months of 2023.
Product sales prices are falling rapidly:
Prices of various types of power battery raw materials have rebounded since the end of last year and the first quarter of this year, driving prices of ternary materials and lithium iron phosphate materials to fall, and negative growth began in February/March. The decline in product prices partially offset the impact of rising sales volume. According to data, prices of ternary materials and lithium iron phosphate materials fell back to 2021 levels faster than raw materials. By the end of April 2023, the East China market had dropped by more than 50% of type 523 ternary materials and lithium iron phosphate materials.
The decline in raw material prices has erased most of the increase against the backdrop of weak demand and inventory removal. Although prices bottomed out in April/May 2023, it is expected to moderately boost power battery prices. However, due to the expected sharp increase in the supply of power batteries, there is relatively limited room for power batteries to rise.
Risk Factors:Prices of raw materials have not stopped falling, leading to a continuous decline in power battery prices; the growth in demand for power batteries has failed to keep up with the rise in production capacity, leading to overcapacity; the growth of new energy vehicles in the mainland has slowed; product pricing and gross margins are too easily affected by industry cyclical and interbank price competition; capacity construction requires a lot of capital, and future financing difficulties and costs will increase further.