Power batteries, the strong ones are always strong.

“Investors Network” Ge Fanmei

In the past 2023, under the “double carbon” goal, the modernization and upgrading of the energy industry, the development and expansion of the new energy industry, and steady investment in energy to promote growth progressed steadily.

According to data released by National Energy, China's energy investment continued to grow rapidly in 2023. Among them, completed investment in new energy sources increased by more than 34% year on year; new energy storage developed rapidly, adding about 22.6 million kilowatt/48.7 million kilowatt-hours of installed capacity; the national electricity market traded 5.7 trillion kilowatt-hours, up 7.9% year on year... New developments in the energy sector continued to add vitality and momentum to the economy.

In fact, although the current ups and downs of the NEV market have brought some “chill” to the industry, the long-term growth trend of the NEV industry has been determined. At present, the global NEV penetration rate is still rising, and the general trend of electrification has not changed. As a core link in the NEV industry chain, power batteries will continue to benefit from the process of industrial chain growth, and will continue to maintain a steady growth trend in the future.

Scale: Strong people are always strong

In 2023, sales of new energy vehicles continued to grow, and demand for power batteries rose sharply, leading to an increase in lithium battery shipments. In recent years, China's lithium battery industry chain has led the world. It has formed a complete industrial chain supporting system in the field of electric vehicles, and is actively expanding overseas markets.

According to information released by the China Automobile Power Battery Industry Innovation Alliance, in 2023, the total cumulative output of power and other batteries in China was 778.1 GWh, a cumulative year-on-year increase of 42.5%. The total cumulative sales volume of power and other batteries in China is 729.7 GWh. Among them, the cumulative loading volume of power batteries in China was 387.7 GWh, a cumulative year-on-year increase of 31.6%. Among them, the cumulative export of power batteries reached 152.6 GWh, accounting for 20.9% of sales.

In terms of installed capacity in 2023, in terms of product types, a “37” pattern has been formed. Among them, the cumulative loading volume of ternary batteries was 126.2 GWh, accounting for 32.6% of the total loading volume, with a cumulative year-on-year increase of 14.3%; the cumulative loading volume of lithium iron phosphate batteries was 261.0 GWh, accounting for 67.3% of the total loading volume, with a cumulative year-on-year increase of 42.1%.

In terms of manufacturers, throughout 2023, Ningde Era (300750.SZ), BYD (002594.SZ), China Airlines (3931.HK), Everweft Lithium (300014.SZ), and Guoxuan Hi-Tech (002074.SZ) were the top five in China, followed by Honeycomb Energy, LG New Energy, Sunwoda (300207.SZ), Funeng Technology (688567.SH), and Zhengli New Energy.

According to the latest data, in the first quarter of 2024, the total installed battery capacity in the world reached 158.8 GWh, an increase of 22% over the same period last year. During this period, the top two companies with total battery installed capacity in the world were China's Ningde Times and BYD. Their battery installed capacity reached 60.1 GWh and 22.7 GWh respectively, accounting for most of the global market.

Among them, the battery installed capacity of the Ningde era increased by 31.9% year on year, while the installed capacity of BYD increased by 11.9%. The market share of these two companies was close to 70%. In addition, the top ten Chinese companies in total battery installed capacity in the world include China Airlines, Everweft Lithium Energy, Guoxuan Hi-Tech, and Honeycomb Energy.

According to data released by the China Automobile Power Battery Industry Innovation Alliance, from January to March 2024, the cumulative load capacity of power batteries in China reached 85.2 GWh, accounting for about 54% of the world, an increase of 29.4% over the previous year.

Profit: Matthew's effect is significant

Although power battery companies are already in the top ten, there is also a big gap in performance. The profitability of some power battery-related companies has increased, proving that the company's performance is solid and profits are stable.

In terms of performance, the 2023 results of Ningde Times, BYD, Everweft Lithium Energy, and Guoxuan Hi-Tech showed both growth in revenue and net profit. Among them, BYD had the largest revenue scale, achieving revenue of 602,315 billion yuan, an increase of 42.06% year on year, and net profit of 30.041 billion yuan, an increase of 80.72% year on year. Judging from the scale of net profit to the mother, the Ningde Era ranked first. Net profit was 44.121 billion yuan, up 43.58% year on year, and revenue was 40.917 billion yuan, up 21.83% year on year.

In the power battery circuit, there is a big gap between the top ten companies in market share. Apart from the two giants of the BYD and Ningde Era, the net profit scale of other power battery companies did not exceed 5 billion yuan, and even some companies lost money. In 2023, Everweft Lithium Energy's net profit was 4,055 billion yuan, ranking third; Sunwoda ranked fourth, with only 1,076 million yuan; Guoxuan Hi-Tech and China Airlines had 938 million yuan and 294 million yuan respectively.

It is worth noting that in 2023, although Funeng Technology's revenue increased by 41.91% year-on-year to 16.436 billion yuan, its net profit declined sharply, resulting in a loss of 1,868 billion yuan, an increase of 926 million yuan over the same period in 2022. The main causes of losses were preparation for inventory depreciation, loss of investment, and loss of changes in fair value. Funeng Technology plans to improve performance in 2023 through management optimization, overseas business expansion, mass production of sodium-ion batteries, and inventory control. According to Funeng Technology's 2024 quarterly report, during the period, the company achieved revenue of 2,924 billion yuan, a year-on-year decrease of 21.70%; net profit to mother was -217 million yuan, which is already narrower than the loss for the same period in 2023.

In terms of gross margin, in 2023, the overall gross margins of Ningde Era and BYD were 22.58% and 20.21% respectively; the gross margin gap between Everweft Lithium Energy and Guoxuan Hi-Tech was small, with 16.76% and 16.30% respectively; followed by Sunwoda, 14.34%, China Innovation Aviation 13%, and Funeng Technology 6.63%.

Challenge: The core conflict in the industrial chain is on the supply side

In 2023, the price of battery-grade lithium carbonate dropped all the way down, from nearly 500,000 yuan/ton in 2022 to more than 100,000 yuan/ton at the end of the year. According to market opinion, the decline in lithium carbonate prices is expected to drive down battery costs and terminal sales prices, and is expected to stimulate downstream demand.

However, in the face of a sharp decline in the price of core raw materials in the supply chain and changes in market orders, high raw material prices created high-priced inventory, which also became a heavy burden for some enterprises in 2023. For example, Funeng Technology has prepared an inventory price drop of 606 million yuan for the full year of 2023.

According to Wind data, as of the end of 2023, the inventory of the BYD and Ningde era was 87.676 billion yuan and 45.434 billion yuan respectively; the inventories of China Airlines and Sunwoda were 7.126 billion yuan and 7.045 billion yuan respectively; Everweft Lithium Energy was 6.3161 billion yuan, Guoxuan Hi-Tech was 5.678 billion yuan, and Funeng Technology was 3,599 billion yuan.

In fact, the rise and fall of the lithium industry cycle changed rapidly in 2023, and the impact on the upstream sector was even more intense. In 2023, lithium prices at 17 listed lithium companies plummeted by 80% during the year, and oversupply had a certain impact on the industry. Of the 17 lithium companies, 14 had a decline in revenue, 16 had a decline in profits, and the decline varied from company to company. Among them, Jinyuan Co., Ltd. (000546.SZ), Jixiang Co., Ltd. (603399.SH), and Jiangte Electric (002176.SZ) lost money, and net profit to mother was -678 million yuan, -337 million yuan, and -397 million yuan, respectively.

By 2024, although lithium prices rebounded in the first quarter, the overall price was still sluggish. According to Wind statistics, the average price of domestic battery-grade lithium carbonate rebounded from 96,900 yuan per ton to 109,600 yuan in the first quarter. The average quarterly price was 101,600 yuan, and the average price for the same period last year was 402,700 yuan.

In this context, lithium companies' quarterly results were naturally not good. Including Tianqi Lithium, Jiangte Electric, Shengxin Lithium, and Ganfeng Lithium, all experienced losses in the first quarter; while the net profit of Yahua Group and China Mining Resources fell sharply by 97.48% and 76.63%, respectively.

Dongxing Securities Research Report pointed out that the core problem in the current sector is still oversupply. The fundamentals are still bottoming out in the short term. The pace of industry expansion has clearly slowed down, downstream competition is intensifying, and pressure on the capital side of various enterprises continues to rise. The industry is expected to accelerate into the final clean-up stage, and the supply and demand pattern is expected to usher in marginal improvements.

At the same time, it believes that the current low fluctuation in lithium carbonate prices and limited room for decline has some support for the decline in industrial chain prices. Under a pattern where the growth rate on the demand side remains stable and the supply side shifts from slowing expansion to gradual clearance, the elasticity of the overall profitability of the sector may improve. Fundamentals are expected to usher in an inflection point, and they are optimistic about opportunities to return after performance bottoms out and stabilizes. (Produced by Thinking Finance) ■