(Report Producer/Author: CITIC Securities, Yuan Jiancong, Wu Weichen, Teng Guanxing, Wang Hao)
Lithium battery industry: demand boom, vast space, clear pattern
Space: Power entered the TWh era, and energy storage ushered in explosive growth
Global demand for lithium power and energy storage batteries is expected to be close to 1.9TWh in 2025, with a compound growth of 63% in 2020-25. In the power field, the global demand for new energy vehicle power batteries in 2021 is about 289GWh, according to our forecast, the global demand for new energy vehicle power batteries in 2025 is expected to reach 1,380GWh, and the industry will enter the TWh era, with high certainty of medium- and long-term growth, large space and fast growth. In the field of energy storage, the global demand for energy storage batteries in 2021 will be about 55GWh, and it is expected that by 2025, the global demand for energy storage batteries will be about 500GWh, and the industry will enter an explosive period with a significant growth rate. We predict that by 2025, the total global demand for lithium power and energy storage batteries will be close to 1.9TWh, and the CAGR will reach 63% in 2020-2025, and the market space is vast.
Pattern: The concentration is gradually increasing, and the leading position is further consolidated
The concentration of the industry has increased significantly, and the leading position of the Ningde era has continued to consolidate. In recent years, the global power battery industry pattern is clear, the market concentration has further improved, according to SNE Research data, the industry CR3 in January-November 2021 is 65%, compared with 57% in 2018, an increase of 8pcts; CR5 is 80%, compared with 68% in 2018, an increase of 12pcts. Among them, the leading position of CATL continues to consolidate, with a global market share of about 32% in January-November 2021, an increase of 9pcts compared with 23% in 2018; South Korean battery company LGES, with a global market share of 20.5% in January-November 2021, second only to NINGDE times. The combined market share (CR2) of the two is 52%, accounting for half of the global power battery market. (Source: Future Think Tank)
All-round comparison between NINGDE era and LGES
Development history: Ningde's leading position is consolidated, and LGES is about to be listed independently
Ningde era: born from ATL, ten years of deep cultivation and finally become a leader. CATL is a leading enterprise of power lithium batteries in China. The founding team founded ATL in 1999 and built it into a global leading enterprise in the field of consumer lithium-ion batteries, and in 2011, Dr. Zeng Yuqun led the team to start a second business, established the Ningde era, and developed rapidly. In 2012, CATL cooperated strategically with the German BMW Group to become its core supplier of power batteries, and then successively established joint venture factories with SAIC, Dongfeng, GAC, FAW and Jili to become the core supplier of leading domestic OEMs; in 2018, the company was listed on the IPO and became a Tesla power battery supplier in 2020. According to SNE statistics, from 2017 to 2020, CATL ranked first in the world's power cell installed capacity for four consecutive years, and its leading position continued to consolidate.
LGES: Derived from the long-established LG Chemical, it will be listed independently. LGES is a leading power lithium battery company in South Korea. Founded in 1947, LG Chem began developing lithium-ion batteries in 1996 and mass production of cylindrical lithium-ion batteries in 1999. In 2000, LG Chem developed a power lithium battery at its R&D facility in Michigan, USA, and in 2009, it supplied the world's first mass-produced EV battery (GM Volt). In December 2020, LG Chem spun off its battery division, LGES was officially established, and the 2021 LGES IPO application was preliminarily approved, and it is scheduled to go public on January 27, 2022.
Customer structure: Ningde is mainly domestic, overseas continues to develop, LGES mainly supplies overseas
Domestic: The Ningde era occupies half of the country, and LGES mainly supports Tesla
Passenger cars are the main customers of Ningde, and the share of special vehicles has increased significantly. From the perspective of vehicle categories, passenger cars are the main installed customers of the Ningde era, with an installed capacity of 49.4GWh in January-November 2021, and a global installed capacity of about 49%; the installed capacity of passenger cars has declined due to the impact of the epidemic, but due to the binding of core customers Yutong Bus, Zhongtong Bus, etc., the installed capacity share of the Ningde era is about 70%, which still maintains a high level; the special vehicle field, whether it is installed capacity or share, has a significant increase, the company's installed capacity in January-November 2021 is 3.4GWh, and the market share is about 63% , an 11pcts increase from 52% in 2020.
Tesla became the largest customer, and the customer concentration gradually declined. From the perspective of the domestic installed customer structure of the Ningde era, from January to November 2021, Tesla surpassed Weilai Automobile and became the largest customer in the Ningde era, with an installed capacity of 11.8%, and the proportion of new force car companies Weilai, Xiaopeng and Ideal installed capacity was 6.7%, 5.5% and 3.4% respectively, ranking high. From January to November 2021, the concentration of domestic customer installed capacity in the Ningde era further declined, and the total installed capacity of the top ten customers was 43.2%, compared with 51.1% in 2020, a decrease of about 7.9pcts.
Tesla's supply share has increased significantly, and the status of new forces and joint venture brands is significant. From the perspective of the supply chain of sub-car companies, 1) Tesla: Since the announcement of the supply of Tesla in February 2020, subject to factors such as capacity construction, the supply share of CATL in 2020 is about 19.8%, lower than 77% of LGES, with the gradual completion of capacity construction and the release of lithium iron models, the supply share of CATL in Tesla in January-November 2021 accounted for 65.6%, a significant increase, and the share of LGES fell to 34.4%; 2) Independent brands: NINGDE times in SAIC, Geely, The share of independent brands such as Dongfeng exceeds 80%, and the share of BAIC BJEV is about 70%; 3) New forces: The share of the Ningde era in the new power car company "Wei Xiaoli" occupies an absolutely dominant position, and NIO and Ideal are still exclusively supplied by NINGDE times, and the supply share of Ningde era in Xiaopeng is more than 80%; 4) Joint venture brands: From January to November 2021, in addition to the low share of GAC Toyota (1.9%), joint venture brands such as FAW Volkswagen, BMW Brilliance, SAIC Volkswagen, Beijing Hyundai is currently supplied by Ningde alone, and the supply share of SAIC-GM and Beijing Benz has also maintained a high level of about 80%.
Overseas: Ningde's early intensive fixed point is expected to usher in the volume, LGES is mainly European and American customers
Successively breaking through benchmark customers, overseas shipments are expected to accelerate growth. Since entering the BMW supply chain in 2012, the company has played a benchmarking role, continued to promote overseas business, and in 2018-2019, it has intensively obtained the designated projects of overseas first-class car companies, and has successively deepened cooperation with Daimler, Hyundai Kia, Jaguar Land Rover, Peugeot Citroen, Volkswagen, Renault Nissan, Volvo, Honda, Toyota, Ford and other international car brands, and supporting models have been listed in the future, and the company's overseas shipments are expected to rise to a higher level.
LGES is mainly based on overseas customers, and the proportion of revenue in Europe and the United States continues to increase. According to the data disclosed in the LGES prospectus, the largest revenue of LGES currently comes from European and American customers, and the revenue of The European region in the first three quarters of 2018-2021 is 399/506/688/738 billion yuan, accounting for 24%/37%/42%/49%; followed by the American customer, the revenue of the Americas region in the first three quarters of 2018-2021 is 36/46/88/116 billion yuan, accounting for 9%/9%/13%/16%. The proportion of revenue in Europe and the United States has increased year by year. According to the prospectus, LGES's main customers include General Motors, Volkswagen, Renault, Hyundai and so on.
Capacity planning: It is expected that in 2025, Ningde will have a production capacity of more than 800GWh and an LGES production capacity of about 450GWh
Layout of ten production bases, It is expected that Ningde will have a production capacity of more than 800GWh in 2025. With Fujian Ningde as the center, the company has five major R & D centers and ten production bases. In 2014, the company established its first overseas subsidiary, Germany Times, and then successively established subsidiaries in France, Japan, the United States and other places to improve the global layout. By the end of 2021, the company's production capacity (wholly owned + joint venture) is about 235GWh, and we expect that by 2025, the company's total production capacity will exceed 800GWh, leading the world in production capacity.
We will build a "five-legged" global delivery system, and the LGES is expected to have a production capacity of about 458GWh in 2025. According to the LGES prospectus, as of the end of the third quarter of 2021, LGES lithium battery production capacity is about 155GWh (South Korea 18 + China 62 + Europe 70 + US 5). In the future, LGES also plans to build a joint venture with General Motors in the United States about 80GWh of production capacity, of which 40GWh is expected to reach production in 2022, and the new 40GWh is expected to reach production in 2023; the joint venture with Stellantis to build 40GWh capacity is expected to reach Q1 production in 2024; and the joint construction of 10GWh with Hyundai Motor in Indonesia is expected to reach production in 2024. We expect the total LGES capacity to reach approximately 458GWh by 2025. LGES will gradually complete the layout of production bases in China, South Korea, the United States, Europe and Indonesia, and build a global delivery system of "five legs".
Technical route: Ningde ternary and iron lithium go hand in hand, structural innovation continues to advance
The four major innovations support the three strategic directions and help accelerate the realization of carbon neutrality. At present, the company's four major innovation system directions are mainly material system innovation, system structure innovation, extreme manufacturing innovation and business model innovation. Four major innovation systems help the company achieve three strategic directions: 1) replace fixed fossil energy with renewable energy generation and energy storage, and the company has made a lot of efforts at the power generation end, the power grid end and the user side, focusing on the layout of electrochemical energy storage; 2) with power batteries to help the development of electric vehicles, continuously improve battery performance, and accelerate the full electrification of the transportation field; 3) to electrification + intelligent integration and innovation to accelerate the process of new energy substitution in various fields. The company's four major innovations and three major strategies promote energy reform and help the country accelerate the realization of carbon neutrality.
Ternary + iron lithium two-wheel drive, battery energy density to the next step. In the battery material system route, the company mainly focuses on ternary and lithium iron phosphate products, of which ternary batteries are mainly used in high-end passenger cars, and lithium iron phosphate batteries are mainly used in low-end passenger cars, commercial vehicles and energy storage fields. In terms of energy density, according to GGII data, the energy density of the ternary battery cells used in passenger cars can reach up to about 260Wh/kg, and the system energy density can reach 206Wh/kg, which is almost the same as the level of LGES ternary batteries. According to the latest research results published on the company's official website, the energy density of the company's ternary battery cells has reached 330Wh/kg, followed by high nickel 811, silicon-doped lithium, CTP and other technologies, the energy density of the battery system has reached 265Wh/kg.
Material system innovation one: high-nickel battery shipments have increased significantly, and customers continue to make breakthroughs. According to the company's announcement, the company's 811 battery accounted for more than 20% of the total shipments of power batteries in 2020, and has been delivered in large quantities overseas. The company's total sales of power batteries in 2020 are 44.45GWh, and according to the proportion of 20% of shipments, the company's 2020 NCM811 battery shipments exceed 8.89GWh. In terms of customers, the company has supplied NCM811 batteries for a variety of electric models of overseas customers such as Daimler (EQS), BMW (X1, iX3), Volkswagen (ID.4 series) and other overseas customers, and has also supported the main models of a number of domestic OEMs such as Hongqi, Weilai, GAC, Xiaopeng, Zero Run, Aiways, geely and so on. More car companies have planned to launch models equipped with high-nickel batteries, and the high-nickel batteries in the Ningde era are expected to accelerate the matching, and shipments are expected to further increase.
Material system innovation two: sodium-ion battery industrialization process accelerated. In July 2021, Ningde took the lead in releasing the first generation of sodium-ion batteries, based on a series of breakthroughs in the material system, the first generation of sodium-ion batteries developed in the Ningde era has the advantages of high energy density, high rate charging, excellent thermal stability, good low temperature performance and high integration efficiency, and its cell single body energy density reaches 160Wh/kg (the next generation of research and development targets are more than 200Wh/kg); charging at room temperature is 15min, the power can reach 80%; -20 °C low temperature environment, there are 90% The above discharge retention rate, low temperature performance is better, and the system integration efficiency is more than 80%. In terms of manufacturing process, sodium-ion batteries can achieve perfect compatibility with lithium-ion battery production equipment and processes, and the production line can be quickly switched to complete the rapid layout of production capacity. At present, CATL has launched the corresponding industrialization layout, and it is expected to form a basic industrial chain in 2023.
Material system innovation three: layout of manganese iron lithium phosphate, is expected to replace lithium iron phosphate. Lithium ferromanganese phosphate (LMFP) is regarded as one of the upgrading directions of lithium iron phosphate (LFP) batteries, LMFP in addition to retaining LFP's consistent advantages of long cycle life, high thermal stability, strong safety, etc., its voltage platform is 4.1V, higher than LFP's 3.4V, in the case of other battery designs the same case can increase the battery energy density by 15%-20%, to a certain extent to make up for the LFP energy density shortcomings. Rieters Lithium Energy is mainly engaged in the research and development, production and sales of lithium-ion battery cathode materials, anode materials, electrolytes and high-purity lithium compounds, with 2,000 tons of lithium manganese iron phosphate production line and 2,000 tons of high-purity lithium carbonate production line, on November 19, 2021, CATL invested 50.76 million yuan to acquire 15.57% of the equity of Rieter Lithium Energy, and at the same time intends to subscribe for its new registered capital for 362 million yuan. By investing in Litai Lithium Energy layout LMFP, CATL is expected to achieve the replacement of lithium iron phosphate and expand more abundant application scenarios.
System structure innovation 1: The industry's first CTP technology, effectively improving battery performance. In 2019, the company launched the industry's first CTP high-efficiency group technology, which can directly integrate the battery cell into the battery pack, eliminate the assembly of the battery module, reduce the manufacturing cost of the power battery, and effectively improve the mileage and economy of electric vehicles. At present, the company's CTP technology has been upgraded to version 3.0, the energy density of the "LFP+CTP" battery system ≥ 160Wh/kg, and the energy density of the "Ternary+CTP" battery system ≥ 250Wh/kg. According to the company's official website, the application of CTP technology can increase the volume utilization rate of battery packs by 20%-30%, reduce the number of parts by 40%, and increase production efficiency by 50%. In addition, CTP battery packs can be widely used in different models because there is no standard module restriction, and the company's "CTP + ternary" and "CTP + lithium iron phosphate" battery packs have achieved large-scale passenger car companies.
System structure innovation two: from CTP to CTC, system structure innovation continues to advance. In August 2020, Zeng Yuqun, the company's chairman of the board, announced at the China Automotive Blue Book Forum that the company is studying CTP's next-generation technology, CTC, which directly integrates power battery cells, related components and chassis. Similar to CTP, CTC technology minimizes battery pack weight and increases internal utilization space, improving battery integration efficiency, thereby increasing system energy density and vehicle range. According to the company's official website, through the use of CTC technology, the cruising range of new energy vehicles can exceed 1000 kilometers, and through the intelligent power domain controller to optimize power distribution and reduce energy consumption, 100 kilometers of electricity consumption will be reduced to less than 12 degrees. The company plans to officially launch CTC battery technology around 2025, considering that the company's CTP technology has been recognized by many domestic OEMs, CTC technology is expected to be applied on a large scale in the future.
System structure innovation three: Launched AB battery solutions to meet the needs of diversified scenarios. Based on the new algorithm of BMS, the company team proposed and realized the design scheme of arranging two different cells of AB in a single battery pack, by integrating the batteries of two different material systems into the same battery system at the same time, mixing, connecting, paralleling, and integrating the balanced control of different battery systems through the precise algorithm of BMS, breaking through the performance boundary of a single material system and achieving complementary advantages. AB can be both "iron lithium + ternary", can also be "lithium battery + sodium battery", but also can be a mix and match of other different combinations, is expected to adapt to more diversified application scenarios, to provide customers with more comprehensive solutions.
LGES technology layout mainly revolves around ternary batteries, and iron lithium products are still in the development stage. According to the LGES prospectus, the technical layout of LGES is divided into two links: material and process, both around the ternary battery. Material link: 1) positive electrode: mainly develop NCMA high nickel quaternary material, is the world's first development of NCMA quaternary battery enterprises, has achieved mass production in 2021; 2) negative electrode: the development of silicon oxide (SiO) anode material, because Si can store more lithium ion, so compared to graphite, SiO has a higher energy density and charging speed, but the current manufacturing cost is higher, only to a small number of high-end electric passenger cars; 3) diaphragm: the development of safety enhanced diaphragm (SRS), By coating the separator with ceramic material, the safety and durability of the battery are improved. Process link: focus on the development of laminated process and long battery cell design, it is expected to be mainly developed around the soft pack battery, used to improve the battery energy density and cruising range. At present, LGES is also developing some cost-effective low-cost batteries, such as lithium iron phosphate and cobalt-free battery products, but we expect that it will be a long way before its large-scale mass production.
Solid-state batteries: NINGDE era and LGES have layouts, but they are not the focus of the business at present. Different from the liquid lithium-ion batteries commonly used today, solid-state batteries are a kind of battery that replaces the traditional electrolyte with a solid electrolyte, which can greatly improve the energy density of lithium batteries, and the solid-state electrolyte can be divided into three categories according to the material system: sulfides, oxides and polymers. AS early as 2013, CATL carried out patent reserves in the field of solid-state batteries, mainly based on sulfide development, and has a number of patents. According to the LGES prospectus, in order to ensure a smooth transition, LGES is currently developing solid-state batteries based on polymer electrolytes, with a manufacturing process similar to that of traditional liquid lithium-ion batteries. We believe that whether it is the Ningde era or LGES, the layout in the field of solid-state batteries is more of a technical reserve, which is not the focus of business development at present, and there is still a long time before the real mass production and large-scale support of solid-state batteries. (Source: Future Think Tank)
The scale and proportion of R&D investment in CATL are leading LGES. In terms of the scale of R&D investment, the company has been leading LGES in recent years and the gap is constantly widening. In the first three quarters of 2021, the company invested 4.59 billion yuan in research and development, 84.3% higher than LGES (2.49 billion yuan). From the perspective of the proportion of R&D investment to operating income, in the first three quarters of 2018-2021, the company was 6.7%/6.5%/7.1%/6.3%, LGES was 4.9%/4.6%/3.4%/3.4%, excluding the one-time income related to SK, in the first three quarters of 2021, LGES R&D investment accounted for 3.6% of revenue, lower than Ningde's 2.6pcts in the same period. We believe that the core technology of the battery company comes from long-term technical investment and independent innovation, and the company's long-term and large-scale research and development investment can ensure that the future has a stronger technological research and development advantage.
The size of the R&D team far exceeds that of LGES, and the number of patents is temporarily lagging behind. Through long-term technology accumulation and development, the company has gradually cultivated a high-level technical research and development team. As of September 30, 2021, the number of R&D personnel in the company reached 9,491, which is nearly 3 times that of LGES (3,323 people) in the same period, and the huge size of the R&D team, coupled with a sound R&D system, can ensure that the company forms a strong independent innovation ability and consolidates its technological advantages. In terms of the number of patents, as of September 30, 2021, the company has 4,155 patents, and the number of patents pending is 4,310, while the number of patents owned by LGES in the same period is 22,854, and the number of patents pending is 12,402, and the number of patents in the company lags behind LGES, and it is expected that the main reasons are: 1) LGES itself has a long history, starting from 1996 to develop lithium-ion batteries, and the number of patents accumulated is large; 2) LGES A significant number of patents are related to consumer batteries.
Cost control: NINGDE has advantages over LGES in raw material procurement and labor costs
The advantages of raw material and labor costs are obvious, and the gross profit margin of power batteries is higher than that of LGES by about 9pcts. Based on the 2020 raw material price, we take the NCM523 as an example to split the cost of CATL and LGES power batteries. Through comparison, it can be found that in terms of material purchase costs, the procurement cost of the Ningde era in the diaphragm, electrolyte and other links is significantly lower than that of LGES, which is converted into a single kWh cost, and the cost of the diaphragm is about 39 yuan / kWh, which is 41.8% lower than that of LGES, and the cost of electrolyte is about 24 yuan / kWh, which is 63.6% lower than that of LGES. Secondly, benefiting from the demographic dividend, the Ningde era also has certain advantages over LGES in terms of labor costs. In the end, we calculated that the gross profit margin of the power battery in the Ningde era was about 25%, which was about 9pcts higher than LGES (LGES was about 16%).
Resource layout: Ningde's integrated layout is more in-depth and the participation methods are diverse
CATL mainly carries out the integrated layout of the industrial chain through investment and equity participation, locking in long orders, joint ventures and co-construction. From the upstream nickel, cobalt, lithium and other metal resources required for the production of power batteries, to the four key raw materials of positive electrode, negative electrode, diaphragm, electrolyte and lithium battery equipment, and then to the middle and lower reaches of the power storage battery manufacturing, charging piles, vehicles, automotive chips, the company deeply promotes the integrated layout of the industrial chain, the main ways are investment and equity participation, locking long orders, joint ventures and co-construction. We believe that in the future, the company will not only be a lithium battery manufacturing enterprise, but also hope to grow into a strategist in the era of energy change and a world-class supplier of integrated energy solutions and services.
LGES mainly adopts strategic cooperation and long-term cooperation to deploy resources. In the field of cooperation with raw material suppliers, LGES on the one hand adopts the method of strategic cooperation, such as cooperating with Capchem to lay out the electrolyte link and cooperating with Solus Advanced Materials to lay out copper foil; on the other hand, it adopts the method of signing long-term agreements with major raw material suppliers to ensure the supply of lithium battery raw materials for a period of time in the future, such as signing a long-term agreement with SQM, QPM, and Greatpower to ensure the supply of metal resources, and Xingyuan Material, Heavenly gift materials signed a long-term agreement to ensure the supply of diaphragms and electrolytes, etc.
Investment analysis
Maintain the company's 2021 net profit forecast of 10.1 billion yuan, taking into account the industry growth rate and the rapid release of the company's production capacity, the 2022/2023 net profit forecast will be raised to 236/333 billion yuan (originally forecast is 19.6/27 billion yuan), corresponding to EPS 4.35/10.11/14.28 yuan (originally forecast 4.35/8.41/11.60 yuan), and the current price corresponds to 131/56/23 PE of 2021/26/20, respectively. Considering that the global automotive electrification trend is relatively certain, high-end power batteries continue to be in short supply, and at the same time, the global energy storage market is about to erupt, and the market space brought by energy change is huge, and the company, as a leader in energy change, is expected to fully enjoy the opportunities for industry development. The company's power battery business is in a high-speed growth period, and the energy storage business will gradually enter the growth period from the introduction period, with high growth certainty and medium- and long-term investment value.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].