The Hidden Worries Behind The Booming Era Of Hard Core Investment And Research In Ningde

Dong Peng, researcher of the 21st Century Capital Research Institute

According to the schedule given by Ningde times, the company will launch sodium ion battery around July 2021.

As time goes by, sodium ion batteries are missing.

Even if it is launched as scheduled, the initial cost will not be low, and the performance indicators of sodium ion batteries are more suitable for low-speed vehicles, two wheeled vehicles and energy storage fields, such as elderly scooters and electric tricycles. Recently, Beijing has just announced the withdrawal of such models.

In other words, sodium ion battery can not effectively impact the current power battery product pattern, and the market supply will still maintain the supply pattern of lithium iron phosphate and ternary battery.

Behind the company's rush to "push new" is the rapid rise of raw materials in the upstream of power batteries.

"Lithium carbonate is pure hoarding, which is unhealthy for the development of new energy industry."“ If anyone tries to raise prices here, we will exclude them. "

Today, Zeng Yuqun, chairman of Ningde times, who has surpassed Ma Yun in wealth, is even more unexpectedly harsh at that time.

Can Ningde era control the price of raw materials?

The answer is No.

Although in recent years, the company has been intensively distributed by means of acquisition, shareholding and joint venture, covering many fields such as nickel, lithium, cobalt, etc., on the one hand, the above-mentioned raw materials are internationally priced commodities, on the other hand, the upstream high-quality resources are controlled by domestic and foreign giants, which is not small.

What we can do is to make use of the bargaining advantage in our industry to reduce the purchasing cost of diaphragm, electrolyte and copper foil as far as possible. However, in the final analysis, the price change of such products still depends on the most upstream raw materials.

On the other hand, the "myth" of Ningde era in a shares is still continuing.

In the secondary market, the company obtained a very high premium. With a huge body of 800 billion yuan of total market value, the company achieved a growth rate of more than 60% and the total market value exceeded 1.3 trillion yuan.

According to the closing price on July 13 and the expected value of earnings per share of RMB 4.33 for the whole year, the dynamic valuation is 130 times, and the secondary market has calculated the profit of the next three years into the stock price.

Is power battery still a good business?

The promotion of new energy vehicle penetration requires stronger battery performance and lower price as the precondition.

That's what happened this year.

As Tesla and BYD adopt more lithium iron phosphate batteries with cost advantages, the penetration rate of domestic new energy vehicles increased month by month in the first half of this year, from 7.2% in January this year to 14%.

Another driving factor is that the price of power battery, which accounts for the highest cost of new energy vehicles, is constantly falling, which makes new energy vehicles have the strength to compete with fuel vehicles under the background of marketization.

Taking Ningde times as an example, the average price of batteries of the company has kept falling continuously in recent years.

From 2015 to 2020, the average selling price of Ningde times power battery system decreased from 2.28 yuan / wh to 0.89 yuan / wh.

It should be pointed out that the cost of 0.6 yuan / wh is the critical point predicted by the industry earlier that "without financial subsidies, new energy vehicles can compete with traditional fuel vehicles".

As far as the industry is concerned, the trend of lower power battery prices is conducive to the promotion of new energy vehicles.

But from a commercial point of view, power battery is still a good business?

At least, the performance of profit margin is relatively average.

In the past few years, with the increase of production capacity and the application of new technologies, the average price and profit margin of power batteries have shown a rapid downward trend.

Based on the data of 2015, Ningde times reduced the average price of power battery by 56% and the average cost by 51% in five years.

The price and cost of the products seem to be the same, but the absolute value of the unit profit of the power battery is constantly decreasing.

According to the above data, from 2015 to 2020, the unit gross profit of Ningde times is 0.95 yuan / wh, 0.93 yuan / wh, 0.5 yuan / wh, 0.4 yuan / wh, 0.27 yuan / wh, 0.24 yuan / wh, respectively.

Correspondingly, the profit margin of the company has been declining continuously.

From 2015 to 2020, the gross profit margin of the company's power battery system business, whose revenue was nearly 80%, dropped from 41.4% to 26.56% in 2020. Only in 2016 did it rise slightly in six years, and it was in a downward trend in other times.

This is an industry trend that cannot be avoided.

The profit margin of GuoXuan high tech's "battery pack" products exceeded 48% in 2015 and 2016, and dropped to 24.72% in 2020.

In this regard, Ningde times also said that "although the comprehensive gross profit rate has gradually decreased, the decline rate has slowed down... The change trend of the company's gross profit rate is consistent with the development of the industry."

As it is, prices cannot fall without limits.

Taking 2018 as the cut-off point, the average price drop of the company's power battery significantly narrowed, from 18.44% in 2018 to 5.6% in 2020.

However, in line with the trend of product price changes, the company's cost side seems to have entered a bottleneck period.

In 2019, the company's power battery cost will decrease by 17.58%, and the decrease rate will be reduced to 3% in 2020, which is based on the low price of lithium, cobalt and other important raw materials.

This year, however, the situation is different.

Benefited from the strong demand for new energy vehicles, the power battery industry chain has greatly increased, so raw materials set off a collective rise.

Cost shock should not be ignored

In the cost of power battery system, material cost accounts for 80% and labor cost accounts for about 20%.

GuoXuan high tech had given detailed data before when issuing convertible bonds. At that time, the unit energy, labor and manufacturing costs of power batteries totaled less than 19%, while the cost of raw materials accounted for more than 81%.

The raw materials of power battery include a large number of lithium, nickel, cobalt, manganese, copper, aluminum, graphite and other upstream raw materials, which correspond to the direct materials such as positive electrode, copper foil, electrolyte, negative electrode, aluminum shell cover plate, etc.

In terms of commodity trends, this year is different from last year.

In 2020, the overall price is slightly higher than the level in 2019. This year, on the basis of the relatively high level in 2020, the average price level is significantly higher than that in 2020.

Take the example of Zeng Yuqun's lithium carbonate as an example: in 2019, the average price of battery grade lithium carbonate in China will remain at less than 74000 yuan / ton, which will drop to 46000 yuan / ton in 2020, and will rise to nearly 79000 yuan / ton in the first half of this year.

As far as power battery is concerned, lithium iron phosphate and ternary battery need to consume a lot of lithium products, such as cathode materials and electrolyte which account for the highest proportion of the above cost components.

In contrast, 35% to 40% of the cost of the electrolyte comes from lithium hexafluorophosphate.

In 2021, the price of lithium hexafluorophosphate continues to rise, from 110000 yuan / ton at the beginning of the year to 380000 Yuan / ton so far, driving the average price of products to 211100 yuan / ton in the first half of this year from 83200 yuan / ton in 2020.

In addition, the prices of peripheral products, including lithium iron phosphate and lithium hydroxide, also rose sharply during the year, driven by the demand side.

Copper and aluminum prices in the field of basic metals, not to mention, are closely linked to the global macro-economy. The former broke through US $10000 in May this year, reaching a record high, while the latter was at a historical secondary high.

Minsheng securities data also showed that as of July 2, 6 μ m、8 μ M copper foil processing costs increased by more than 30% and 50% respectively compared with the beginning of the year, mainly due to the strong downstream demand and the rise of raw material copper price in the same period.

In contrast, among the direct materials for power battery, only diaphragm and anode graphite are relatively stable. However, considering the extremely high capacity utilization rate of the current industry and the release of new capacity of power battery next year, the industry also has the expectation of price increase in the future.

Under the background of systematic rise of bulk commodities, the cost of power battery materials is undoubtedly increasing rapidly, although there is no direct data to verify at present.

In a survey conducted in late May this year, some investors mentioned what is the most worrying problem in Ningde era.

The answer given by the company is "how to do business well under the background of changes in international pattern, shortage of supply chain resources and shortage of localized supply"

It should be pointed out that under the influence of the global liquidity inflection point not yet coming, the increasing permeability of new energy vehicles and the limited supply elasticity of upstream lithium ore, the price of power battery raw materials is less likely to drop in the short term.

Even, some raw materials do not rule out the possibility of further rise.

Lithium producers, for example, do not seem to be in a hurry to "scale up" after experiencing a decline from 2018 to 2020.

For the rise in the price of lithium products, upstream is obviously more willing to see its success.

Mapping to the 2021 financial reports of enterprises in the middle reaches of the industrial chain such as Ningde times, it may be the end of the downward trend of the cost curve mentioned above, and even its average cost trend may turn upward this year.

"High tactics" in Ningde Era

"Material cost reduction includes business cost reduction and R & D cost reduction. On the one hand, the company actively expands the industrial chain, strengthens the upstream and downstream cooperation of the industrial chain, and promotes business cost reduction; On the one hand, increase R & D investment, optimize product design, improve product performance, and provide customers with excellent products and services... "

According to the official caliber of Ningde times, the company's plan to deal with the rise of raw materials is as follows.

Business cost reduction is easy to understand, especially in the domestic market. With more than 50% market share, Ningde times is almost impossible for all new energy vehicle enterprises.

With the position and scale of the industry, Ningde era has shown its advantages in the process of bargaining with suppliers. No wonder Zeng Yuqun said that he would "exclude those who raise prices in disorder".

In terms of R & D, BYD has blade battery and Ningde era has CTP technology. Theoretically, both solutions can improve the performance of power battery and reduce the cost.

In addition, the specific cost reduction means include increasing the yield rate through "extreme manufacturing", building the raw material circulation chain by increasing the resource recovery link, and improving the raw material supply elasticity through a small amount of investment and signing medium and long-term agreements.

However, according to the company's strategy of "replacing fixed fossil energy with renewable energy and energy storage as the core", the corresponding recycling resources may be targeted at the field of energy storage products.

More importantly, in the past few years, Ningde era has carried out intensive layout in the industrial chain in the form of shareholding, joint construction of production capacity, signing of supply agreement, etc.

Taking the basic raw materials such as lithium, cobalt and copper as an example, the company has almost completed the coverage.

Among them, lithium is the most important.

Ningde times holds 8.5% of the shares of Pilbara, an Australian lithium miner. At the same time, it also holds a wholly-owned 8% equity of North American lithium and Neo lithium, a Canadian lithium company, through its subsidiary Canada times.

In terms of lithium salt, after building the power battery capacity in Yibin, Sichuan Province, Ningde times also obtained 25% equity of local Tianyi lithium industry.

The situation in the copper and cobalt industries is similar. The partners and suppliers include Luoyang molybdenum and Glencore, and signed long supply orders with the latter. Glencore will supply no less than 137800 tons of cobalt resources in the next 10 years.

Ningde times is also jointly constructing power battery material projects, such as the "80000 tons of lithium iron phosphate project with an annual output of 80000 tons" with the German nano plan, and the "50000 tons of positive electrode material project" planned to be constructed by Jiangxi Biochemical Engineering Co., Ltd.

However, some problems should not be ignored.

First of all, from the perspective of material layout, because the cathode materials account for the highest proportion of power battery cost, Ningde era mainly focuses on cathode materials. Some of the new production capacity of anode materials and electrolyte needs to be purchased, while diaphragm and copper foil are highly dependent on suppliers.

Secondly, Ningde era's investment in upstream mineral resources is "piecemeal", the amount of investment is not large, and the cooperative resource side is not the mainstream of the industry.

Taking lithium resources as an example, the mainstream miners and producers of lithium carbonate and lithium hydroxide are Yabao of the United States and sqm of Chile, as well as Tianqi lithium industry and Ganfeng lithium industry in China. These enterprises have significant cost advantages and form an interest community with mutual shareholding.

For example, Tianqi lithium shares in sqm and controls talison. Another important shareholder of talison is American Yabao, and Ganfeng lithium holds the underwriting right of Mount Marion, the second largest mine in Australia.

It can be said that the current supply pattern of high-quality lithium resources in the world has been very fixed, but this "circle" is not easy to enter in Ningde era.

As for the supply of cobalt resources, Glencore is a trader after all, so it is difficult to guarantee the supply price. The "import price" of cobalt resources is expected to be adjusted regularly with the market industry.

The price game relationship between upstream and downstream of other cycle industries also exists in the power battery industry chain. However, due to the overall improvement of the new energy vehicle boom, the price level contradiction is covered by sales volume in a short period of time.

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