Source of this article: Times Finance Author: Liao Wei
On January 27, LG New Energy, the world's second largest and South Korea's largest power battery manufacturer, was officially listed.
The listing of LG New Energy has ignited the enthusiasm of Korean investors. According to reports, LG New Energy's IPO has accumulated 114 trillion won and 4.424 million subscribers, both of which set a record for South Korea. Its shares rose 99 percent to 598,000 won after the opening of its listing.
It is reported that the IPO will raise about 68.3 billion yuan worth of funds for LG New Energy. LG New Energy plans to use this financing to meet the rapid growth demand of the new energy automobile industry for power batteries. The company plans to invest 8.85 trillion won in its battery plants in South Korea, Poland, the United States and China by 2025, nearly doubling its production capacity to 400 gigawatt hours (GWh).
In this regard, some insiders said that LG New Energy will achieve faster development with the help of this fund, which will also have a certain impact on the current and future global power battery industry pattern. Some power battery industry insiders told Times Finance that the previous 45 billion yuan fixed increase plan of CATL Era may also take into account the ultra-large-scale IPO of LG New Energy.
According to the recent announcement of CATL, as of the end of the third quarter of last year, its theoretical annual production capacity has reached 220GWh to 240GWh. According to estimates, battery production capacity is expected to reach more than 670GWh by 2025. CATL believes that the demand for power and energy storage batteries will increase significantly in the next few years, and its market share still has some room for improvement.
"Scale is the key to determining the position of the industry." In this regard, an insider of a head power battery company told Times Finance that "the status and installed capacity of each factory today have been determined in previous years, and everyone is now expanding production for the position of the next few years."
Source | LG New Energy Official Website LG New Energy: The future will surpass the Ningde era
LG Chem has been developing lithium-ion batteries since 1995, and its battery business has expanded from small batteries to power batteries and energy storage systems over the past 26 years.
From 2009 to 2010, LG Chem became the first company in the world to supply lithium-ion batteries for HEVs and PHEV. In 2020, its battery business was spun off and LG New Energy was established. At present, LG's new energy business covers almost all mainstream car companies in Europe, and Tesla and Geely are its customers in the Chinese market.
With the help of the wave of new energy vehicles, LG's new energy/LG chemical battery business has achieved leapfrog development in recent years. According to the data, in the three years from 2018 to 2020, the revenue scale of LG Chemical Battery Division increased from 6.5 trillion won to 12.4 trillion won, with a three-year growth rate of 24.1%, 30.5% and 41.1%, respectively. In 2020, LG New Energy generated revenue of US$10.5 billion (about 66.5 billion yuan), and the company plans to expand revenue to US$27.2 billion (about 172.2 billion yuan) in 2024.
According to the prospectus, LG New Energy lost 0.45 trillion yuan and 0.43 trillion won in 2019 and 2020, respectively. In the first three quarters of 2021, its gross profit margin was 18.3%, 33.5% and 18.8%, respectively. As of the third quarter, LG New Energy's net profit was 0.86 trillion won (about 4.6 billion yuan).
Source | LG New Energy
For reference, although some profit margins have been squeezed due to the increase in the price of upstream raw materials, as of the end of the first half of 2021, the gross profit margin of CATL has been stable at more than 23%. Some insiders told Times Finance that "the reason why there can be such a performance is that it benefits from the more perfect power battery industry chain in China, and the average cost of China's manufacturing industry is lower than that of Europe, the United States, Japan and South Korea, and second, the continuous investment in the industrial chain in the Ningde era in recent years has also helped it control the adverse effects of material price increases to a certain extent."
On the first day of LG New Energy's listing, CATL also released last year's performance forecast on the same day, and the data showed that CATL expected net profit in 2021 to be between 14 billion yuan and 16.5 billion yuan. According to the third quarter report of 2021, the net profit attributable to shareholders of CATL was 7.75 billion yuan.
Although in many respects it has fallen behind the Ningde era, LG New Energy is not willing to be a "deputy team leader". According to media reports, at a press conference held this month, LG New Energy CEO Quan Weishou said that he expected the company's market share to surpass the Ningde era in the future, but did not disclose a specific timetable.
Can the throne of the Ningde era sit firmly?
In 2021, CATL successfully defended its own ring.
According to statistics from South Korean market research institute SNE, in the first 11 months of 2021, LG New Energy's power battery loading volume was 51.5 GWh, with a market share of 20.5%. At the top of the list, the loading volume of CATL reached 79.8 GWh, with a market share of 31.8%. If there is no accident, the victory and defeat have been divided.
However, the current new energy vehicle market is still in a stage of vigorous development, but also a period of grass and tyrants, the three major markets in China, Europe and the United States will determine who can laugh last.
In the field of power batteries, due to the early development time, the European and American markets are almost LG New Energy and Panasonic's own land, while the domestic power battery companies led by the Ningde era firmly occupy the Chinese market share. Under this pattern, battery manufacturers want to go further in the fierce industry competition, in addition to holding the basic disk, but also actively explore other markets.
However, from the current development of various enterprises, the development of LG new energy is not optimistic. According to the data of China Automotive Power Battery Industry Innovation Alliance, in 2021, the top 5 domestic power battery companies will install vehicles in Ningde Times, BYD, Zhongxin Aviation, Guoxuan Hi-Tech, and LG New Energy, with market share of 52.1%, 16.2%, 5.9%, 5.2% and 4% respectively.
For the sluggish performance of LG New Energy in the Chinese market, Times Finance called Aierji New Energy Battery (Nanjing) Co., Ltd. (which is LG New Energy China Branch) many times on the 27th, but it has not been able to connect. However, people in the power battery industry told Times Finance that it lags behind companies such as the Ningde era, in addition to historical reasons, it is also related to the higher price of its products under the same specifications. Moreover, the power battery has a complex customer certification process, the cycle is long, and the car company will not easily replace the supplier once it is determined, which also means that it is difficult for the new enterprise to break into the supply system without a suitable opportunity.
In contrast, in the Ningde era, its sea momentum is very gratifying. According to the data of the 2021 semi-annual report, the domestic income and overseas income of the Cataline Era were 33.874 billion yuan and 10.2 billion yuan respectively, with a year-on-year growth rate of 104% and 355%, and the gross profit margin was 25.11% and 34.39% respectively. In addition, Guoxuan Hi-Tech will supply the public in 2023, Fu Neng Technology has entered the Mercedes-Benz supply system, and other Chinese power battery companies are also actively going overseas.
Mo Ke told Times Finance that the strength of the Ningde era in the European market will also bring a lot of pressure to LG, Samsung and other Korean power battery manufacturers. "Nowadays, China's power battery manufacturers have considerable ability to keep pace with Japanese and Korean companies, which is why multinational car companies such as Mercedes-Benz and Volkswagen dare to place orders for domestic battery manufacturers."
Some insiders pointed out that with the successive going to sea of Chinese power battery companies, the survival pressure of Japanese and Korean companies will become more and more intense. Mo Ke also believes that there is no advantage in the technical quality of products, but the price of products is relatively higher, which will also make Korean companies such as LG New Energy gradually lose the market in competition with Chinese companies.