The blockbuster document of lithium battery accelerates the elimination of backward production capacity, and the performance of industrial chain companies is about to bottom out

Securities Market Weekly Market Number

2024-05-18 14:20Published on the official account of Beijing Hongkan Finance

Text丨Li Hongli

Editor丨Undertaking

The introduction of the "Standard Conditions for the Lithium Battery Industry (2024 Edition)" (draft for comments) will effectively resolve the problem of phased overcapacity in multiple links of the lithium battery industry chain, which is conducive to the long-term healthy development of the industry. 

On May 8, the Ministry of Industry and Information Technology issued the "Lithium Battery Industry Standard Conditions (2024 Edition)" (Draft for Comments) and the "Lithium Battery Industry Standard Announcement Management Measures (2024 Edition)" (Draft for Comments) (hereinafter referred to as the "Draft for Comments"). Among them, the statement on "guiding enterprises to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs" has attracted the attention of the industry. 

Stimulated by the bullish policy, on May 9, the new energy sector set off a tide of daily limits, Tianli Lithium Energy, Jinyang Shares, Hezong Technology 20CM daily limit, Tianhong Lithium Battery, Xiangfenghua, Dangsheng Technology rose more than 11%, and the Wind lithium battery index also rose more than 4% in a single day. As of May 15, the Oriental Fortune lithium battery sector index rose 2.07% in the past 20 days and more than 20% in the past 60 days. 

Accelerate the clearance of backward production capacity

In recent years, with the explosive growth of new energy vehicles, China's lithium battery industry has also expanded rapidly, and the influx of capital has changed the lithium battery industry from "undersupply" to "oversupply". 

The "Draft for Comments" gives guidance and specific suggestions from several aspects such as industrial layout and project establishment, production and operation and process level, and product performance, so as to promote the transformation of lithium battery industry production capacity to high-end and high-quality. The "Industrial Layout and Project Establishment" section of the Draft for Comments mentions that enterprises should be guided to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs. The "production, operation and process level" part mentions: lithium battery enterprises should have independent production, sales and service capabilities of related products in the lithium battery industry; The annual expenses for R&D and process improvement shall not be less than 3% of the main business income. 

At the same time, the Draft also proposes to encourage enterprises to obtain the qualifications of independent R&D institutions, engineering laboratories, technology centers or high-tech enterprises at or above the provincial level; encourage enterprises to create green factories; Encourage enterprises to build or participate in the joint construction of pilot platforms; The main products have technical invention patents; At the time of declaration, the actual output of the previous year shall not be less than 50% of the actual production capacity of the same year. 

"The high-end capacity of the lithium battery industry is not excessive, and the low-end repeated production capacity needs to be cleared at an accelerated pace." Mo Ke, president of the real lithium research institute, said that the actual output of the previous year at the time of declaration was not less than 50% of the actual production capacity of the same year, which means that the entry threshold is increasing, and at the same time, enterprises need to increase R&D investment to promote the innovation of lithium battery technology, which means that some backward production capacity will be eliminated at an accelerated pace. 

Economist Yu Fenghui said that the impact of the policy on the lithium battery industry is mainly reflected in the following aspects: first, it will prompt enterprises to pay more attention to technological innovation and product upgrading, especially to improve battery energy density and safety, which will contribute to the overall technological progress of the industry. Secondly, by restricting blind expansion and encouraging high-quality development, it will help avoid excessive competition and overcapacity in the industry and enhance industry concentration. For lithium battery companies, this is both a challenge and an opportunity, and those companies with core technology, efficient production and cost control capabilities will be more favored by the market. 

Huang Xiuyu, an analyst at Dongguan Securities, also said that in the context of the current overcapacity of the lithium battery industry, the Ministry of Industry and Information Technology has revised the industry norms to guide technological innovation, transformation and upgrading, and promote high-quality and healthy development. It will speed up the clearance of backward production capacity and prevent low-price disorderly competition, which is conducive to the improvement of capacity utilization rate and profit recovery of leading enterprises with technical advantages and high-quality production capacity. The revised draft pays attention to product quality and low-carbon environmental protection, and actively paves the way for enterprises to go overseas, which is conducive to improving the international competitiveness of enterprises and benefiting leading enterprises as a whole. 

Multiple "crossover" projects press the pause button

When lithium prices remain high, the entire lithium battery industry chain has become a hot spot for capital investment, and it has also attracted many enterprises to cross borders, but with the intensification of the contradiction between supply and demand in the lithium battery market, the enthusiasm for capital investment has gradually receded. 

Baoming Technology, which is mainly engaged in the display business, announced on April 29 that the company plans to terminate the composite copper foil (lithium battery anode current collector material) production base project with an original planned investment of up to 6.2 billion yuan. Baoming Technology said that due to the change in the investment plan, in order to avoid the waste of project resources, it was decided to terminate the investment project. 

On April 26, China Soft Technology announced the termination of two electrolyte additive projects with a total investment of 450 million yuan. China Soft Technology said that due to factors such as market conditions, investment environment and changes in administrative approval policies, the company decided to terminate the project with an annual output of 12,000 tons of lithium battery electrolyte additives and the project with an annual output of 6,000 tons of fluoroethylene carbonate (FEC) lithium battery electrolyte additives. 

In addition, the food company black sesame has also suspended related lithium battery projects. On April 19, an investor asked questions about the energy storage lithium battery project of Black Sesame Company, which has far exceeded the expected completion time, and Black Sesame replied: "In view of the major changes in the new energy battery market situation from the second half of 2023, there are significant differences with the assumptions of the company's project feasibility study. 

In addition to the above cases, since last year, there have been many companies that have canceled or terminated lithium battery projects, such as: Zhongyuan Co., Ltd. suspended its investment in the fixed increase plan for the integrated construction project of high-performance lithium-ion battery anode materials with an annual output of 200,000 tons; After the adjustment of GCL-ET's convertible bond plan, the annual output of 30,000 tons of battery-grade lithium carbonate project was deleted; Shangtai Technology's Licheng Road base was discontinued; Capchem terminates the construction of Zhuhai Capchem Electronic Chemicals Project; Wait a minute. 

Yu Fenghui said that a number of listed companies have terminated or suspended the construction of new projects, reflecting that the lithium battery industry is experiencing an adjustment period, the growth rate of market demand is slowing down, and enterprises have begun to rationally assess investment risks. This shows that the industry is shifting from rapid expansion in the past to refined management and optimization of existing production capacity, and also reflects the market's expectation of future demand growth for lithium batteries. 

Qiu Boyuan, fund manager of Kangzhuang Asset Management, said that market forces are forcing them to stop expanding production and promote the clearing of production capacity. In the short term, the production capacity of this market is indeed oversupplied, especially in terms of low-end production capacity, but in the long run, high-quality production capacity is still far from enough. 

In the first quarter, the performance of material companies bottomed out

A reversal is imminent?

At the current stage of weakening investment enthusiasm and the suspension or termination of lithium battery projects, the material enterprises in the middle and upper reaches of the industrial chain cannot escape the cyclical impact of the lithium battery industry, and the performance in the first quarter of this year has changed face. 

Taking Tianqi Lithium and Ganfeng Lithium as examples, the net profit in the first quarter of 2024 will turn from profit to loss. In the first quarter of 2024, Tianqi Lithium achieved operating income of 2.585 billion yuan, a year-on-year decrease of 77.42%; The net profit loss was 3.897 billion yuan, a year-on-year decrease of 179.93%. In the same period, Ganfeng Lithium achieved operating income of 5.058 billion yuan, a year-on-year decrease of 46.41%; The net profit loss was 439 million yuan, a year-on-year decrease of 118.31%. 

In addition, the performance of anode material companies beiteri and Putailai has also declined to varying degrees. According to Wind statistics, 15 of the 19 A-share lithium mining listed companies will experience a decline in revenue growth rate in the first quarter of 2024, and 14 will experience a decline in the growth rate of net profit attributable to the parent company, accounting for 78% and 73% respectively. 

From the point of view of the reasons, the first is the price factor. Ganfeng Lithium said that the impact of fluctuations in the lithium product and lithium battery markets led to a decline in sales prices in the current period. Salt Lake said that on the whole, there is a phased mismatch between market supply and demand, and prices show a gradual downward trend. This has led to a cautious attitude on the downstream demand side when purchasing, mainly to digest inventory and control the risk of price loss. 

In the face of the current industry situation, how should lithium mining companies and material companies alleviate the pressure on development? 

"The real bull stocks are not because of the windfall profits, but because of the scale." Qiu Boyuan believes that at this stage, lithium mining enterprises should vigorously deploy exploration, mining and smelting, integrate themselves into the entire industrial chain, and ask for value from the industrial chain, value from scientific and technological innovation, and value from extreme efficiency. Lithium mining companies must be soberly aware that lithium is a material that can be recycled, which is fundamentally different from lithium and crude oil, and the global demand for lithium mines will not expand indefinitely. Finally, lithium mining enterprises and aluminum mining enterprises will look exactly the same, their return on net assets, sales gross margin, corporate net profit margin will converge, towards the basic profitability of the society, lithium mining companies should pay attention to the emergence of revolutionary technologies in the energy field, such as hydrogen fuel cells, controlled nuclear fusion, solid-state batteries, etc. may change the pattern of the industry. 

Since December 2022, the price of lithium carbonate has continued to fall, compared with the peak price of nearly 600,000 yuan/ton, and has now dropped to about 100,000 yuan/ton, a decrease of about 80%. Many people believe that the opportunity for the industry to reverse has been provided, so is the inflection point of the lithium battery industry really coming? 

Li Yan, fund manager of China AMC Fund, said that after in-depth research, it was found that the lithium battery industry is currently in the bottom reversal stage, and the capacity utilization rate of some leading companies is as high as 80% to 100%, and the fundamentals are clearly improving. 

Xiong Yuzhou, manager of Harvest Global Innovation Leading Equity QDII Fund, also said that based on the current node, from the combination of factors such as inventory cycle, new demand scenarios, and marginal changes on the supply side, the opportunity for the industry to reverse has been available, and the gradual rise in prices and recovery of some varieties in the industrial chain is also a side verification. "At present, lithium battery is undoubtedly in a state of low valuation at the low point of the cycle (mainly measured by PB, PS, etc.), with the improvement of fundamentals and the gradual enhancement of the signal of upward profitability, we are still looking forward to the future performance of the sector." 

In Yu Fenghui's view, the current sharp decline in lithium carbonate prices is more reflected in the price correction after the adjustment of supply and demand. Whether it is an industry reversal or not, it is necessary to observe the subsequent supply and demand balance, the global economic recovery and the growth trend of new energy vehicle market demand. "In the short term, this may be seen as a rebound, but in the long term, if market demand continues to grow, the industry is expected to enter a healthier and more stable growth cycle." 

Qiu Boyuan said that the current price of lithium carbonate and the price of products in all links of the entire industrial chain are at the bottom stage, considering that new energy vehicles, energy storage and other fields continue to grow rapidly, the industry reversal is certain. 

(This article was published in the May 18 issue of Securities Market Weekly.) The individual stocks mentioned in this article are for example analysis only and do not constitute a recommendation for trading. ）

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