Contemporary Amperex Technology released its semi-annual report, with a net income attributable to shareholders of RMB 22.87 billion in the first half of the year, up 10.37% YoY, but revenue decreased 11.88% YoY. During the conference call for the financial report, company executives stated that the unit gross profit of the company was stable and the biggest influencing factor was the price fluctuations of raw materials. The overseas market layout and expectations also received attention from investors.
On the evening of July 27, Cailian Press reported (journalist: Zengchuchu) that Contemporary Amperex Technology (300750.SZ) released its semi-annual report last night, with revenue in the first half of the year decreasing by more than 10% YoY, but net income increasing by 10% YoY. According to the materials obtained by Cailian Press reporters regarding the interpretation of the semi-annual report, the most concerned issue during the investor conference call last night was why the company could maintain profit growth despite the decline in revenue in the lithium battery industry that is facing internal competition, as well as the company's overseas market layout and project progress.
Reduced revenue and increased profit, with stable unit gross margin.
On the evening of yesterday, Contemporary Amperex Technology released its semi-annual report, recording a total revenue of RMB 166.77 billion in the first half of the year, down 11.88% YoY, with a net income attributable to shareholders of RMB 22.87 billion, an increase of 10.37% YoY. Among them, the net income attributable to shareholders was RMB 10.51 billion in Q1 and RMB 12.36 billion in Q2, a QoQ increase of 17.6%.
According to Cailian Press reporters and multiple capital market sources, Contemporary Amperex Technology's Q2 performance met expectations.
From the perspective of the industry, the sales of the battery industry in the second quarter increased MoM. According to data from the China Automobile Power Battery Industry Innovation Alliance, cumulative sales of power and other batteries in China from January to June reached 402.6 GWh, a YoY increase of 40.3%. Among them, from January to March, the sales volume was 164.3 GWh. Based on this, the estimated Q2 sales volume was 238.3 GWh, a QoQ increase of 45%.
Under the fierce market price competition, as the prices of upstream materials fell, battery prices followed suit. According to research reports from Guosen Securities on July 12, 2021, the price of square lithium iron phosphate power battery cells has fallen by 4.65% since the beginning of the year, and by 36.92% YoY. The decline in raw material prices is even more severe. As the main raw material for cell production, the price of lithium carbonate has fallen by more than 70% YoY. Affected by prices, Contemporary Amperex Technology's power battery system revenue in the first half of the year decreased by 19.20% YoY, but the decline in operating costs was greater, reaching 25.84%. This also increased the power battery gross margin by 6.55% to 26.9%.
How Contemporary Amperex Technology can maintain a high gross profit margin under the background of falling battery prices is also a major concern for investors. Company executives stated, "Compared to the first quarter, the unit price of batteries dropped, and costs are also rapidly falling, so the unit gross profit is relatively stable. It seems that the gross profit margin has increased, but we are actually not earning much money in terms of unit gross profit." In addition, the company takes into consideration the support and competition relationship from cooperation partners in some projects, but the biggest influencing factor is the price fluctuation of raw materials.
Contemporary Amperex Technology's Q2 performance met expectations.
Company executives stated,"The unit price of batteries declined in the second quarter compared to the first quarter, and costs are also rapidly falling, so the gross profit per unit is relatively stable. It seems that the gross margin has increased, but we are actually not earning much money in terms of unit gross profit." Additionally, the company offers certain rebate support for cooperation partners and considers the support and competition relationship from cooperation partners in some projects, but the biggest influencing factor is the price fluctuation of raw materials.
In the first half of the year, Contemporary Amperex Technology's battery system production capacity reached 323GWh and production volume reached 211GWh, with a capacity utilization rate of 65.33%. Jiangli, the Deputy General Manager and Board Secretary of Contemporary Amperex Technology, revealed during the conference call that the company shipped 110GWh of power and energy storage batteries in the first half of the year, with energy storage batteries accounting for nearly 25%, and the growth rate of power batteries increasing by 45% YoY. Among the power batteries, Shenxing and Qilin batteries accounted for about 30-40% of the shipments.
Based on this estimate, the company's production and sales rate was 52.13%, and the capacity utilization rate also did not reach the industry peak of more than 90%, but Contemporary Amperex Technology is still expanding its production. Jiangli stated that when this year's interim report is released, the company's capacity under construction will exceed 150GWh. "In fact, we feel that the demand is still very strong. We have accelerated the speed of overseas and domestic production capacity construction, and we believe that the future speed will still be stable."
Regarding production expectations for the third quarter, Jiangli stated that the semi-annual report showed that the company's capacity under construction exceeds 150GWh, and due to the very strong demand that we have seen, the upcoming orders are going to be very saturated, and everyone is working very hard and putting in a lot of overtime.
During the conference call, the overseas market was the focus of capital markets' expectations for the future of the lithium battery market, especially the energy storage market.
Contemporary Amperex Technology's Q2 performance met expectations according to Cailian Press reporters and multiple capital market sources.
The semi-annual report shows that the overseas revenue of Contemporary Amperex Technology this year was RMB 50.53 billion (mainly for battery systems), a YoY decrease of 24.77%, accounting for about 30.3% of the total revenue. Despite the decline in revenue, Contemporary Amperex Technology's overseas business maintained a high gross margin of 29.65%, an YoY increase of 8.16%. Jiangli stated that the profitability in overseas is higher, the after-sales requirements in overseas are also higher, and the overall situation is reasonable and stable.
During the conference call, Jiang Li revealed that the 153GWh under construction capacity in the semi-annual report includes nearly 70GWh for the first two phases of the European Hungarian factory, which means that at least half of the under-construction capacity is overseas, and the overseas market has gradually become the focus of Contemporary Amperex Technology's operations.
According to the semi-annual report, overseas-wise, CATL's German factory has obtained dual certification from Volkswagen Group's module testing laboratory and cell testing laboratory, becoming the world's first battery manufacturer to obtain Volkswagen Group's module certification and Europe's first battery manufacturer to obtain Volkswagen Group's cell certification. The Hungarian factory has completed the topping out of some plants and equipment debugging, and relevant construction work is progressing in an orderly manner.
Jiang Li stated that the German factory is still in the ramp-up state, and the annual goal is to "draw a tie". As for Hungary, "The cost in Hungary is more advantageous than that in Germany, and we have learned from the operation in Germany, which has better cost advantages. Future orders are also more abundant, and the future demand is also very good. We look forward to future performance."
On the focus of overseas markets, CATL executives stated that the current shipment volume in the United States is not large, and the focus is still on the European market. Regarding the European market, Jiang Li said that Europe had a period of rapid electrification, but in the past two years, it has been affected by various factors, resulting in the European market being in a relatively flat state this year.
Regarding the future, Jiang Li believes that the European market may face some challenges this year or next year. By 2026, as the learning curve of local car companies in Europe continues to rise, if new competitive models emerge, local demand is expected to increase accordingly, "In fact, from the order data we have received, we think we are still optimistic."
Regarding the LRS (License, Royalty, Service) cooperation model, which had been mentioned by former CATL Chairman Zeng Yuqun many times before on the US market, Jiang Li stated, "We are firm in pushing forward LRS, seeking win-win and sharing methods, and we will see how to cooperate based on the situation."
Another executive added, "The energy storage market is relatively strong in the US market. The energy storage shipment volume in the first half of the year has grown significantly. If there is any change in the future, the company will work with its partners to land together, and there is no exclusion of the LRS model."
It is reported that in February 2023, Ford Motor announced its cooperation with CATL to invest $3.5 billion in establishing a new battery manufacturing plant in Michigan, which Ford will fully own and operate, and CATL will provide patent licenses, technology and service support. CATL calls this type of cooperation model the "LRS" model.