High-end manufacturing: It is expected that the annual growth rate of new energy vehicle sales will be high and low| Xingxing Research

Weekly research report

Huaxing Securities "Xing Research" extracts the essence of last week's research report of Huaxing Securities Research Institute for you, helping you to fully understand the economic trends at home and abroad and analyze the hot spots of market segments.

Relying on the resource acquisition ability of China Renaissance Capital Group and China Renaissance Securities in the new economic field, China Renaissance Securities Research Institute has reached many corners of China's new economic field, combining secondary market research methods and primary market investment banking experience, and striving to bring cutting-edge research results in the new economic field.

High-end manufacturing:

New energy vehicle sales remained strong in January, and the annual growth rate is expected to be high and low

China's new energy passenger car sales in January were 347,000 units, up 132% year-on-year, with a penetration rate of 16.4% in the month

Domestic power battery production in January was 29.7GWh, an increase of 148% year-on-year; installed capacity reached 16.2GWh, an increase of 86% year-on-year; top5 manufacturer concentration further increased to 87% (85% in December)

We believe that the recent correction in the new energy sector is mainly due to concerns about the high valuation of the sector and the uncertainty of future sales, and we are optimistic that the long-term growth trend will not change

The new energy vehicle market remained strong in January, with a penetration rate of 16% in the month: According to the data of the China Association of Passenger Vehicles, the sales volume of the domestic narrow passenger car market in January was 2.092 million units, down 4.4% year-on-year and 0.6% month-on-month, but considering the loss of some sales during the Spring Festival, the overall trend of retail sales in January was good. Retail sales of passenger cars in the sense of the generalized sense reached 2.112 million units in January, down 4.5% year-on-year. Sales of new energy vehicles reached 347,000 units in January (BEV/PHEV units were 269,000 units, respectively), up 132% year-on-year and down 27% month-on-month, and the decline was partly affected by the centralized delivery at the end of 2021, which was in line with the characteristics of January 2021 (down 25% month-on-month). The penetration rate of new energy vehicles in the month reached 16.4% (compared with 22.6% in December 2021). The top five models in January in terms of domestic new energy vehicle sales include: Hongguang MINI (26,682 units), BYD Qin (26,541 units), BYD Song (20,722 units), Tesla (Model Y) (16,358 units), ANDD Han (12,781 units). In January, BYD's pure electric and plug-and-mix dual drives performed strongly, with three models entering the top five rankings. Judging from the January performance, Tesla Model 3 sales are relatively weak, while the high year-on-year growth of Model Y is mainly due to the low base of last year; we believe that Tesla's frequent price adjustments and the localization advantage of domestic new energy vehicle brands have reduced consumers' current enthusiasm for Tesla models.

Lithium iron phosphate batteries maintain rapid growth, and the concentration of domestic brands is further improved: the demand for power batteries in January is consistent with the growth trend of new energy vehicles, and it is growing at a high speed compared with the same period last year. According to the data of the Power Battery Innovation Alliance: 1) In terms of production, China's power battery production in January 2022 totaled 29.7GWh, an increase of 148% year-on-year and a decrease of 6% month-on-month. Ternary battery production was 10.8GWh, up 59% year-on-year and down 5% month-on-month; lithium iron phosphate battery production was 18.8GWh, up 262% year-on-year and 7% month-on-month. 2) In terms of installed capacity, the installed capacity of power batteries in January was 16.2GWh, up 86% year-on-year and down 38% month-on-month. Ternary batteries installed a total of 7.3GWh, up 35% year-on-year, down 34% month-on-month; lithium iron phosphate batteries installed a total of 8.9GWh, up 170% year-on-year, down 41% month-on-month, lithium iron phosphate battery installed capacity continued to rise. 3) In terms of enterprise concentration, according to the data of the Power Battery Innovation Alliance, in January 2022, the top five enterprises in the domestic installed capacity include: Ningde Era (8.13Gwh), BYD (3.39Gwh), Zhongxin Airlines (1.20Gwh), Guoxuan Hi-Tech (0.94Gwh) and Honeycomb Energy (0.44Gwh), with a total power battery installed capacity of 14.10GWh, accounting for 87% of the total installed capacity. Domestic brands continued to grow strongly, among which the market share of BYD and China Innovation Aviation increased significantly, reaching 20.9%/7.4% respectively (14.2%/5.9% in December), and the top five manufacturers in January were domestic brands, and the concentration was further improved (85% concentration in December).

Recently, the new energy sector represented by the Ningde era has seen a large correction, and we believe that the main reason is still due to investors' concerns about the high valuation of the current sector and the uncertainty of maintaining high growth in future new energy vehicle sales. Combined with the january production and sales data of new energy vehicles, we believe that the current new energy vehicle sector still has a high degree of prosperity, and the fundamentals continue to improve the trend has not yet changed significantly. At the same time, coupled with the rush to buy demand caused by the decline of subsidies in 2023 and the factors such as power battery manufacturers have raised the factory price of batteries, we believe that the performance of midstream battery manufacturers in 2022 will have a large upside. Therefore, we maintain the same sales forecast of New Energy Passenger Vehicles in China in 2022/25, at 5.3/10 million units, with a penetration rate of more than 20%/40% respectively; the corresponding installed power battery capacity reaches 250/500Gwh.

Risk warning: 1) sales of new energy vehicles are less than expected; 2) competition in the industry is intensifying; 3) raw material prices continue to rise.

("High-end Manufacturing - New Energy Vehicle Sales Remain Strong in January, Expected To Grow High and Low throughout the Year", Report Date: February 18, 2022)

Power battery industry chain seminar series seminar minutes report

The overall supply and demand balance of cathode materials, the outbreak of energy storage market led to the growth of demand for lithium iron carbonate

The negative electrode price was affected by the rising price of raw materials to maintain a slight increase, and the high capacity requirement drove the silicon anode to become the mainstream direction

Electrolyte demand is expected to increase by 50%-100% over the previous year, and the overall supply will gradually relax from the second half of the year

Under the advantage of low cost, the short-term proportion of lithium iron phosphate is expected to exceed ternary, and the long-term proportion of ternary will gradually rise and surpass

We participated in the series of expert meetings on the power battery industry chain hosted by China Renaissance Capital, and the sharing guests were from non-listed companies such as: well-known new energy technology enterprises, power battery manufacturers, battery material companies and power battery research institutions, and were familiar with related industries.

The overall supply and demand balance of cathode materials and precursors, energy storage outbreaks drive the growth of iron and lithium: the overall balance of ternary materials and precursor production and demand, high-end production capacity is insufficient. Lithium iron phosphate is in short supply and is currently in the stage of capacity expansion. Under the "double carbon" policy, the energy storage market is growing explosively, and the demand for lithium iron phosphate in 2023 may reach one million tons, of which energy storage accounts for 40%; in the field of new energy vehicles, the future intelligent trend is obvious, the power consumption is increasing, and the high-end adapts to high-nickel materials. Due to the doubling of the price of cobalt and nickel this year, the price increase of lithium carbonate exceeded expectations, and there are still more uncertainties.

The price of anode materials maintained a slight increase, and silicon anode became the mainstream direction. The reasons for the rise in the price of the negative electrode are: 1) needle coke (cooked rubber) rose from 5000-6000 yuan / ton to 11,000 yuan / ton, an increase of 40-50%; 2) power rationing and "double carbon" policy had an impact on the graphitization capacity of Inner Mongolia by 20%, making its price rise from 11,000 yuan / ton in early 2021 to more than 20,000 yuan / ton; anode materials will maintain a slight increase in the future. The expansion period of anode materials is late and the expansion cycle is long, and the shipment of anode materials in 2021 is more than 300,000 tons, and the total planned expansion capacity is 1 million tons. With the release of production capacity in the first half of 2022, especially in the second half of the year, the shortage of negative electrode supply will be alleviated. The main reasons for the future development direction of silicon anode pole are: 1) the mileage of new energy vehicles should put forward higher requirements for battery capacity, the capacity of graphite materials is close to the theoretical limit, and the theoretical capacity of silicon anode is 300-1000mAh/g, which has a large space for development; 2) Silicon resources are abundant. Silicon carbon, silicon oxygen anode battery is the current key route, which is of great help to the increase of battery capacity, and the two technologies will usher in a peak in a period of time, and the current silicon oxygen market share is higher.

Electrolyte demand continues to rise, supply gradually relaxed since the second half of the year: demand side, this year's TOP10 power battery companies are expanding production, electrolyte demand is still 50-100% higher than the previous year. On the supply side, lithium hexafluorophosphate manufacturers actively expand production, the market price is 50-57 million yuan / ton, the future upward fluctuation potential is small; the solvent is affected by the upstream ethylene oxide, propylene oxide, the overall is still in a state of shortage; vinylene carbonate (VC) has been in a state of overcapacity, the price fell to more than 300,000 yuan / ton, the overall supply began to relax in the second half of the year. The new lithium salt LiFSI can improve the thermal stability of the electrolyte and improve the high temperature performance of the battery. Last year, the development of LIFSI was not as expected, and the price fell to 350,000-380,000 yuan / ton, forming an inversion with lithium hexafluorophosphate.

Lithium iron phosphate accounts for more than ternary in the short term, and ternary in the long term: the guest predicts that the total demand for the lithium battery market in 2022 will be 350-400GWh, of which the demand for new energy vehicles will be 250-300GWh. Lithium iron phosphate and the ternary market accounted for 5.5: 4.5 or 6: 4, the main reasons are: 1) lithium iron battery - kWh electricity cost is 100-140 yuan lower than ternary, in the current high price of raw materials and resources has a considerable advantage; 2) consumers accept the price increase needs reasons, and in the short term, this year's car intelligence will not make great progress, so the demand for electricity will remain stable, so the demand for cheaper lithium iron batteries is more vigorous. In the long run, the proportion of ternary demand in 2024 is expected to rebound, and in 2025, ternary more than lithium iron is a high probability event. In 2022, the leading market share of the lithium battery market will be further improved, and OEMs have enthusiasm for semi-solid-state batteries for full cost considerations, and the strong players of this technology may challenge the market pattern.

Risk warning: 1) the demand for electric vehicles is less than expected; 2) the price of raw materials fluctuates sharply; 3) the competition in the lithium battery industry is becoming increasingly fierce; 4) the bottleneck of technological development.

("High-end Manufacturing - Insight Series: Power Battery Industry Chain Seminar Minutes Report", Report Date: February 18, 2022)

Zai Ding Pharmaceutical:

Zele's inclusion in the medical insurance directory is expected to promote the company's sales continued growth

Zele, as the only first-line and recurrent ovarian cancer maintenance treatment PARP inhibitor included in the medical insurance directory, is expected to maintain rapid growth in 2022

Continuously expand our product portfolio through potentially convertible assets and partnerships

Zele continues to drive revenue growth: Zaiding Pharma's commercialized drugs, including Zejula/Ripretinib, have strong sales, and according to management data, the company's 9M21 achieved revenue growth of 188%/140% year-on-year, respectively, and promoted the overall revenue of pharmaceuticals by 195% year-on-year (3Q21 revenue achieved US$43.1 million, an increase of 193%), and we expect 4Q21 revenue to be US$44 million. We believe that with the support of the Medicare Catalogue (as the only PARP inhibitor to be included in the first-line and recurrent ovarian cancer maintenance therapy), Zele will maintain rapid growth in 2022. We have lowered our revenue forecast for 2021-23 by 31-42% due to declining Optune and Efgartigimod sales, but we emphasize that overall revenue growth remains strong, taking into account the potential for commercialization of other products and the company's extensive sales force (covering more than 300 cities), the revenue growth rate for 2021/22/23 is expected to be 169%/147%/53%, respectively. Highly visualized and diversified market potential in China and beyond: Zaiding Pharmaceutical announced on its Investor Day in January 2022 that over the past 7 years, the company has established 28 potential first-in-class (FIC)/best-in-class (BIC) product pipelines, of which the company has independently developed 11 global patented products, 4 products are commercialized in China, and 3 global patented products are undergoing clinical research and development. Management expects the company to have more than 15 products available for more than 35 indications by 2025. For example, ZL-1102, which can be used to treat psoriasis infected in approximately 125 million people worldwide, has completed a proof-of-concept and will enter the global clinical development phase in 2022. R&D expenses of 1H21 Zaiding Pharmaceutical rose sharply to US$346 million (1H20: US$102 million). Given the company's ongoing and newly initiated late-stage clinical studies, we expect future R&D expenses to continue to grow.

Strategic partnership is expected to expand the market and expand the product line: Zai Ding Pharmaceutical announced two strategic cooperation in November 2021: 1) Reached a partnership with Blueprint Medicines and obtained the exclusive development and commercialization of BLU-945 and BLU-701 in Greater China, which is expected to further strengthen the company's lung cancer product pipeline. 2) Partnered with Karuna Therapeutics to acquire the exclusive right to develop and commercialize KarXT in Greater China, which is expected to expand the company's existing product business in the field of neurology.

Risk Warning: 1) Drug R&D Risk; 2) Risk of Intensified Competition; 3) Financing Risk; 4) Foreign Exchange Risk; 5) Risk of COVID-19 to Business Operations.

("ZLAB US) - Zele's inclusion in the Medicare Catalogue is expected to promote continued sales growth", report date: February 17, 2022)