Zhongke Electric will increase the production capacity of the Ningde era by 3 times The production and sales of lithium battery materials will boost the net profit by 230 million yuan

Yangtze River Business Daily reporter Shen Yourong

The popularity of new energy vehicles has driven the upstream of the industrial chain to seize opportunities and expand production in a large scale. GEM company Zhongke Electric (300035. SZ) is no exception, tightening the waistband of the pants to expand production.

On the evening of February 20, Zhongke Electric announced that it would join hands with Ningde Times to invest in the construction of a 100,000-ton lithium battery anode material integration project.

The reporter of Changjiang Business Daily found that the joint investment and construction of the above projects in the Ningde era was actually the landing of the investment and construction projects previously disclosed by Zhongke Electric. If this project plus the fixed increase project that the company is planning is successfully completed and reaches production, the company's production capacity will increase by nearly 3 times.

For the surge in capacity consumption, Zhongke Electric does not seem to be worried. The company said that the main downstream customers are mostly expanding production, and the market demand has increased significantly.

Benefiting from the production and sales of lithium battery materials, in 2021, Zhongke Electric's operation has achieved a bumper harvest, and its expected net profit has doubled.

In the secondary market, the overall performance of Zhongke Electric's stock price has been outstanding, and since last year, its stock price has risen by 2 times.

Jointly build and expand production projects with CATL

Zhongke Electric's expansion plan is landing step by step.

According to the latest announcement, Zhongke Electric and Ningde Times signed an agreement to jointly increase the capital of Zhongke Xingcheng Graphite Co., Ltd. (hereinafter referred to as Zhongke Xingcheng in Gui'an New District) for the construction of the "100,000 tons per year lithium battery anode material integration project".

Specifically, Zhongke Xingcheng Holdings will increase the capital of Zhongke Xingcheng in Gui'an New District by 420 million yuan, and CATL or its wholly-owned subsidiaries will increase its capital by 280 million yuan, after the completion of the capital increase, the registered capital of Zhongke Xingcheng in Gui'an New District will increase from 100 million yuan to 800 million yuan, and Zhongke Xingcheng in Gui'an New District will be held by Zhongke Xingcheng Holdings and NINGDE Times or its wholly-owned subsidiaries will hold 65% and 35% of the shares respectively.

According to the announcement, the "100,000 tons per year lithium battery anode material integration project" to be built by Zhongke Xingcheng in Gui'an New District will be built in two phases, with the first and second phases planning to build a production capacity of 65,000 tons and 35,000 tons respectively. After the project is completed and put into operation, CATL enjoys the right of priority procurement for the production capacity of such negative electrode expansion projects.

Zhongke Electric said that the cooperation between the company and ningde times is conducive to the company deepening cooperation with downstream manufacturers in the field of lithium batteries, integrating the superior resources of both sides and achieving win-win cooperation. At the same time, the cooperation can also provide financial support for the expansion of the company's lithium battery anode business, accelerate the expansion of production capacity, ensure the company's capacity utilization rate, and help the company adapt to the market competition and rapid development of the new energy lithium-ion battery industry.

In the market's view, the cooperative investment and construction project in the Ningde era is mainly to raise construction funds and lock in future product sales.

In fact, as early as last December, Zhongke Electric disclosed the above-mentioned investment and construction projects. At that time, the announcement said that Zhongke Electric planned to invest in the construction of an anode material integration project with an annual output of 100,000 tons of lithium batteries in Gui'an New Area, Guizhou, with a total investment of 2.5 billion yuan. The project is divided into two phases, the first phase of the project with a total investment of 1.7 billion yuan, covering an area of about 400 acres, the construction period does not exceed 24 months, and the anode material integration project with an annual output of 65,000 tons of lithium batteries has been completed. The total investment of the second phase of the project is 800 million yuan, covering an area of about 200 acres, the construction period does not exceed 18 months, and the anode material integration project of lithium batteries with an annual output of 35,000 tons has been completed. Judging from the cooperation and construction of the Ningde era, this move is the specific landing of the previously disclosed project.

In addition to promoting the above projects, Zhongke Electric is also promoting the increase in capital and laying out a new expansion project. In August last year, Zhongke Electric disclosed the fixed increase plan, and on November 9, the company revised the fixed increase plan. According to the Revised Draft, the Company intends to issue no more than RMB193 million in shares to no more than 35 specific targets and raise no more than RMB2.26 billion. The funds raised, after deducting related expenses, 470 million yuan of supplementary working capital, 800 million yuan of investment in the project of Zhongke Xingcheng Graphite Production Base with an annual output of 50,000 tons of lithium battery anode materials, and 936 million yuan for the construction of an anode materials for lithium batteries with an annual output of 30,000 tons and 45,000 tons of graphitization processing projects.

After the project is fully completed, Zhongke Electric will add 80,000 tons of lithium battery anode material production capacity and 45,000 tons of graphitization capacity.

If the above-mentioned 100,000 tons of lithium battery anode material integration project is also successfully produced, the total new lithium battery anode material production capacity of Zhongke Electric will reach 180,000 tons / year. The new production capacity increased by 290.32% compared with the company's 62,000 tons at the end of September this year.

Zhongke Electric said that since 2020, the demand for anode materials corresponding to the main expansion plan for power batteries announced by the company's main downstream customers has been 1.5397 million tons. From 2021 to 2023, the estimated demand for lithium battery anode materials calculated by the company according to the purchase intention is 95,000 tons, 207,000 tons and 310,000 tons, respectively, and the market demand is enough to cover the company's production capacity planning.

In summary, it has been announced that it will invest in the construction of anode materials for lithium batteries with an annual output of 180,000 tons, and Zhongke Electric will spend 4.3 billion yuan, which is close to the company's total assets of 4.413 billion yuan.

Long-term cooperation with BYD in the Ningde era

Cooperation with CATL is not the first time. Zhongke Electric dares to expand production on a large scale, and its confidence is also related to the Ningde era. Because, the company has maintained long-term cooperative relations with downstream customers such as CATL and BYD.

In the financial report, when Zhongke Electric introduced its core competitiveness, in addition to the advantages of technology, talent resources and collaborative development, the company focused on its customer channel advantages. The company said that over the years, the excellent independent research and development capabilities, fine quality control system and rapid market response mechanism have accumulated the trust of many large customers for the company, and have also established a good image and won an important position for the company in the industry. Lithium battery anode business, the company and BYD, CATL, AVIC lithium battery, Ewell lithium energy, Ruipu energy, hive energy, Suzhou Xingheng, South KoreaSKI, ATL and other industries, at home and abroad to maintain long-term good cooperative relations. At the same time, while continuing to deepen cooperation with existing major customers, the company actively expands high-quality new customers in the industry and increases the development of overseas markets.

In addition, in the magnetoelectric equipment business, the company has established a stable and smooth business relationship with most domestic steel companies and large metallurgical engineering contractors, and the market share of electromagnetic metallurgical special equipment exceeds 60%, which is in the leading position in the industry.

In 2021, the operating performance of Zhongke Electric is relatively outstanding. According to the third quarterly report, in the first three quarters of this year, the company achieved operating income of 1.388 billion yuan, an increase of 116.81% year-on-year, net profit of 251 million yuan, an increase of 122.86% year-on-year, and net profit after deducting non-recurring gains and losses (referred to as non-net profit) of 245 million yuan, an increase of 135.28% year-on-year.

The reporter of Changjiang Business Daily found that the operating income, net profit and non-net profit achieved in the first three quarters of this year not only doubled year-on-year, but also greatly exceeded the level of last year.

From a single quarter, in the first two and three quarters of this year, the company's operating income was 328 million yuan, 495 million yuan and 565 million yuan, respectively, an increase of 97.29%, 149.47% and 105.09% year-on-year. The corresponding net profit was 0.67 billion yuan, 0.92 billion yuan and 0.91 billion yuan, an increase of 160.73%, 171.09% and 73.18% respectively year-on-year.

In fact, not only in the first three quarters of this year, from 2016 to 2020, Zhongke Electric achieved net profit and deducted non-net profit and continued growth. In 2016, its realized net profit and net profit after deducting non-net profit were 0.23 billion yuan and 0.19 billion yuan respectively, and in 2020, it was 164 million yuan and 153 million yuan, an increase of 613.04% and 705.26% respectively in 4 years.

According to the 2021 performance forecast, Zhongke Electric is expected to achieve a net profit of 344 million yuan to 393 million yuan, an increase of 180 million yuan to 230 million yuan over the same period of the previous year, an increase of 110%-140% year-on-year. It is expected that the non-net profit will be 321 million yuan - 366 million yuan, an increase of 168 million yuan - 213 million yuan year-on-year, an increase of 110% - 140%.

The main business of Zhongke Electric has two major sectors, namely lithium battery anode business and magnetoelectric equipment business.

The company explained that in addition to the rapid growth of the revenue of the magnetoelectric equipment sector, affected by the growth of the global new energy automobile industry and downstream customer demand, the company's lithium battery anode material production and sales volume have increased significantly year-on-year.

In the secondary market, since May 17 last year, the stock price of Zhongke Electric has shown an upward momentum. On November 1, the stock price reached a maximum of 42 yuan / share, and then the stock price adjusted, on February 21 this year, the stock price was 31.91 yuan / share, up 204.48% from 10.48 yuan / share on May 14 last year, and the maximum increase in the range was 300.76%.