On January 25, lithium battery giant Ganfeng Lithium released its 2021 annual performance forecast, saying that it is expected that the net profit attributable to shareholders of listed companies in 2021 will be 4.8 billion yuan to 5.5 billion yuan, an increase of 368.45% to 436.76% year-on-year, and it is expected that the net profit after deducting non-profit for the whole year will be 2.9 billion yuan to 3.6 billion yuan, an increase of 621% to 795.04% year-on-year.
The volume of lithium series products has soared
Looking back at the net profit of Ganfeng Lithium in the previous 10 years, the highest value appeared in 2017, when the net profit of Ganfeng Lithium was 1.469 billion yuan, but in the subsequent 2018 and 2019 net profit fell successively, although the momentum rose again in 2020, the net profit reached 1.025 billion yuan, but it was far less rapid than the rapid growth in 2021. Combined with the previous financial report data, Ganfeng Lithium made a single quarter of 480 million yuan, 940 million yuan and 1.06 billion yuan in the first three quarters of 2021, respectively, according to which the company's net profit in the fourth quarter of 2021 was 2.32 billion yuan to 3.02 billion yuan, which has greatly exceeded its net profit for the whole year of 2020.
The increase in the volume of lithium series products is the main driving force for ganfeng lithium's net profit to soar in 2021. Ganfeng Lithium pointed out in the report that with the rapid development of new energy vehicles and energy storage industry, the demand for lithium salt from downstream customers has grown strongly, so the company's lithium salt product production and sales have increased and product prices have continued to rise.
According to data from the China Automobile Association, the production and sales of new energy vehicles in 2021 reached 3.545 million units and 3.521 million units, respectively, an increase of 1.6 times year-on-year. With the rapid growth of new energy vehicle production and sales, both vehicle companies and power battery companies have made full use of their horsepower and announced the expansion of production capacity. According to the incomplete statistics of high-tech lithium batteries, in 2021, there will be 63 power battery investment and expansion projects (including fundraising projects), with a total investment of more than 621.8 billion yuan and a planned new production capacity of more than 2.5TWh. This naturally led to a sharp rise in the demand for raw materials upstream of power batteries. The data shows that in 2021, the production and sales of lithium products in Ganfeng Lithium will reach 54,300 tons and 63,000 tons respectively.
Not only that, benefiting from the strong demand for downstream new energy vehicles, lithium salt prices have continued to rise in 2021. Taking lithium carbonate as an example, relevant data show that the domestic battery-grade lithium carbonate market price rose from 53,000 yuan / ton at the beginning of 2021 to 275,000 yuan / ton at the end of the year, an increase of more than 400% during the year. Battery-grade lithium carbonate is one of the important raw materials for new energy vehicle power batteries, and is also a key revenue segment of Ganfeng Lithium, so the impact of rising lithium carbonate prices on it is also very direct. According to previous data, the gross profit margin of Ganfeng Lithium in the first three quarters was 35.55%, up 16.73 percentage points year-on-year, of which the gross profit margin in the third quarter was 36.12%, up 18.16 percentage points year-on-year.
Ganfeng Lithium has a complete industrial ecological chain, which also includes downstream lithium battery production. In the report, Ganfeng Lithium also mentioned that in 2021, the company's lithium battery plate new projects have been put into production, and production capacity has been gradually released, which has also led to the rise of the company's operating net profit. Judging from the data of the first half of this year, ganfeng lithium battery plate achieved revenue of 764 million yuan, an increase of 84.3% year-on-year, which is the largest increase in the company's performance.
It is reported that relying on the first-mover advantage in the upstream supply of lithium resources, Ganfeng Lithium's lithium battery business has laid out five major market segments such as consumer batteries, polymer small batteries, solid-state lithium batteries, lithium power batteries, and energy storage batteries. In 2021, the related business ushered in new progress. For example, in June 2021, Chery New Energy A00-class new car Costinec1 equipped with Ganfeng LFP batteries officially entered the new car announcement, becoming the first passenger model to support Ganfeng lithium power batteries. Subsequently, in July, Ganfeng Lithium signed a contract with dongfeng company technology center to sign a demonstration promotion agreement for solid-state battery E70 models.
In addition, it is worth noting that Ganfeng Lithium pointed out in the report that in 2021, the company's financial assets held by the company generated fair value change income, resulting in a year-on-year increase in the company's non-recurring income.
Ganfeng Lithium's explanation of the reasons for the change in performance; Image source: Screenshot of Ganfeng Lithium's announcement
As can be seen from the data mentioned above, there is a difference of 1.9 billion yuan between Ganfeng Lithium's annual net profit attributable to the mother and the net profit deducted from the non-attributable mother. It is reported that the non-recurring profit and loss of 1.9 billion yuan mainly comes from the income from its holding of Pilbara (PLS.ASX) equity. According to public information, Pilbara is an Australian listed company, and the main product of spodumene concentrate is the raw material for the production of lithium carbonate. Ganfeng Lithium has subscribed to the company's shares several times since 2017, and in 2021, The secondary market trading price of Pilbara has continued to rise, and Ganfeng Lithium has also benefited greatly from its stock price growth.
Subsequent increases are still considerable
The outbreak of Ganfeng Lithium's performance in 2021 benefited from the above factors, and in 2022, or even in the next 2-3 years, the above positive probability will continue.
Recently, the State Council issued the notice of the "14th Five-Year Plan" Comprehensive Work Plan for Energy Conservation and Emission Reduction. The "Plan" proposes that by 2025, the sales volume of new energy vehicles and new vehicles will reach about 20% of the total sales of new automobiles. This means that the policy level has once again clarified the development direction of new energy vehicles.
In fact, this data may be conservative. It should be known that the market share of new energy vehicles in 2021 has increased to 13.4%, 8 percentage points higher than that of the previous year, and the growth is very rapid. According to the China Automobile Association, mainland automobile sales will reach 27.5 million in 2022, an increase of 5.4% year-on-year. Among them, the sales of new energy vehicles will reach 5 million units, an increase of 47% year-on-year. Based on this calculation, the proportion of new energy vehicle sales this year is likely to reach 18%.
Caucus predicts that sales of new energy vehicles will reach 5 million units in 2022; image source: CAAM
From the current point of view, the price of lithium materials is still rising. Still taking lithium carbonate as an example, into 2022, the price of the material is still high, and it is said that relevant manufacturers have quoted 300,000 yuan / ton. CITIC Securities pointed out in the relevant research report that the tight supply of lithium in 2022 may not be alleviated, and it is expected that lithium prices will maintain an upward trend, and thanks to the rise of lithium prices, the performance of lithium companies in 2022 is expected to increase significantly, bringing significant valuation advantages. The relevant research report of Guojin Securities believes that the supply and demand tension in the industry will be difficult to alleviate in the next 2 to 3 years, and the average price of lithium carbonate is expected to remain at 300,000 / ton this year and next year.
Through the above content, it can be seen that Ganfeng Lithium's field will remain high. As far as Ganfeng Lithium itself is concerned, the expansion of the company's lithium battery-related production capacity and the growth of supporting business in 2022 are expected to ensure the continued growth of its performance.
According to the data, as of December 2021, Ganfeng Lithium's battery-grade lithium carbonate production capacity is 43,000 tons/year, and the battery-grade lithium hydroxide production capacity is 81,000 tons/year. In addition, the company's new 50,000 tons of lithium hydroxide production capacity and the first phase of Caucahri-Olaroz Salt Lake 40,000 tons of lithium carbonate will be put into operation this year, ensuring steady growth in production and sales. Ni Wenyi of Guojin Securities pointed out that considering the layout of existing resource projects and lithium salt expansion plans, Mexico Sonora lithium clay 20,000 tons + CO salt lake phase II 20,000 tons + Mali Goulamina spodumene project 60,000 tons, by 2025 the production capacity is expected to exceed 260,000 tons, to achieve a resource self-sufficiency rate of nearly 80%.
It is also worth mentioning that in November 2021, Ganfeng Lithium signed a "Product Supply Contract" with Tesla, agreeing that from January 1, 2022 to December 31, 2024, the company and Ganfeng International will supply battery-grade lithium hydroxide products to Tesla, and the actual purchase quantity and sales amount will be subject to the purchase order issued by Tesla. The company noted that the contract will be fulfilled and revenue recognized between 2022 and 2024, which has a positive impact on operating results for these three years.
Ganfeng Lithium signed a "Product Supply Contract" with Tesla; image source: Screenshot of Ganfeng Lithium's announcement
In addition, on January 22 this year, the Dongfeng E70 demonstration operation vehicle equipped with Ganfeng solid-state batteries was first launched in Xinyu, and the first batch of 50 solid-state battery demonstration operation vehicles were officially put on the market. The first production line of Ganfeng Lithium Battery Phase II's new lithium battery project with an annual output of 10GWh was also officially put into operation on the same day.
In summary, with the continuous popularity of downstream new energy vehicle sales and the upward price of lithium materials, the profits of the industrial chain are expected to further shift upstream, which is undoubtedly a major positive for Ganfeng Lithium, which is accelerating the improvement of resource self-sufficiency.