High-end manufacturing: New energy vehicle sales continue to grow high trend| Xing research

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High-end manufacturing:

New energy vehicle sales continued to grow at a high rate in February

China's new energy passenger car sales reached 272,000 units in February, up 181% year-on-year, with a penetration rate of 21.4% in the month

In February, domestic power battery production was 31.8GWh, an increase of 236% year-on-year; installed capacity reached 13.7GWh, an increase of 145% year-on-year; BYD and China Innovation Airlines grew strongly

New energy vehicle companies raised their retail prices to cope with rising raw material costs. We are optimistic that new energy vehicles will sell more than 5 million vehicles in 2022

New energy vehicles maintained high growth in February, with a penetration rate of 21.8% in the month: According to the data of the Association of Passenger Vehicles, the domestic narrow passenger car market sales in February were 1.246 million units, an increase of 5.9% year-on-year and a decrease of 40.4% month-on-month, mainly due to the decrease in the number of production and sales days during the Spring Festival holiday. Retail sales of passenger cars in the sense of the generalized sense reached 1.272 million units in February, up 6.5% year-on-year. New energy vehicle sales in February reached 272,000 units (pure electric/plug-in hybrid sales were 206,000 units, respectively), up 181% year-on-year and down 21.4% month-on-month, outperforming the situation in February of the calendar year. The penetration rate of new energy vehicles reached 21.4% in the month (up from 16.4% in January). From January to February, the cumulative sales of new energy vehicles reached 624,000 (pure electric/plug-in hybrid units were 48.0/144,000 units, respectively), up 153.1% year-on-year, and the cumulative penetration rate reached 18.3%. In February, the top 5 models of new energy vehicles sold in China were: Hongguang MINI (26,116 units), BYD Qin (24,501 units), BYD Song (22,754 units), Tesla (Model Y) (18,593 units), ANDD Tang (10,026 units). IN February, BYD maintained its leading position, and the performance of pure electric and plug-and-mix dual drives remained strong.

BYD and China Innovation Aviation grew strongly, and Ningde's share declined slightly: the demand for power batteries in February was consistent with the growth trend of new energy vehicles, and the growth rate accelerated compared with the same period last year. According to the data of the Power Battery Innovation Alliance: 1) Production: In February 2022, China's power battery production totaled 31.8GWh, an increase of 235% year-on-year and a month-on-month increase of 7%. The production of ternary batteries was 11.6GWh, an increase of 128% year-on-year and 7% month-on-month; the output of lithium iron phosphate batteries was 20.1GWh, an increase of 367% year-on-year and 7% month-on-month. 2) Installed capacity: The installed capacity of power batteries in February was 13.7GWh, up 145% year-on-year and down 15% month-on-month. Ternary batteries installed a total of 5.8GWh, up 76% year-on-year, down 21% month-on-month; lithium iron phosphate batteries installed a total of 7.8GWh, up 255% year-on-year (up from 170% in January), down 12% month-on-month, and the installed capacity of lithium iron phosphate batteries accelerated. From January to February, the cumulative installed capacity of power batteries in the mainland reached 29.9GWh, an increase of 110% year-on-year; among them, the installed capacity of ternary and lithium iron phosphate batteries reached 13.1/16.7GWh respectively, up 51%/203% year-on-year, respectively. 3) Enterprise concentration: According to the data of the Power Battery Innovation Alliance, the top 5 companies in the domestic installed capacity from January to February are: CATL (14.7Gwh), BYD (6.29Gwh), Zhongxin Airlines (2.35Gwh), Guoxuan Hi-Tech (1.64Gwh) and Hive Energy (0.77Gwh), with a total power battery installed capacity of 25.8GWh, accounting for 86% of the total installed capacity. The position of domestic brands has been further consolidated, competition from second-tier manufacturers has intensified, and the market share of BYD and China Innovation Aviation has maintained steady growth, with the cumulative market share reaching 21.1%/7.9% respectively (the cumulative market share in 2021 is 16.2%/5.9%, respectively).

Despite the risk of fluctuations in raw material prices, we are still optimistic about the sales of new energy vehicles: the price of raw materials upstream of new energy vehicles has fluctuated sharply recently, of which the price of lithium carbonate has risen to 500,000 yuan / ton. Nickel, which is the core material of the ternary cathode, also has abnormal fluctuations in futures prices, but we believe that this is mainly due to speculative factors in the financial market and does not reflect the physical supply and demand situation. Since the end of last year, a number of new energy manufacturers (Tesla, Xiaopeng and BYD, etc.) have raised retail prices to cope with rising cost pressures, of which Tesla announced on March 10 that it would raise the price of Model 3/Y high-end models by 10,000 yuan each. For midstream power battery factories, we believe that the current trend of continuous rise in raw material prices will offset the effect of some battery manufacturers raising their ex-factory prices at the beginning of the year, so the comprehensive impact of the two on gross profit margin remains to be seen. Overall, we believe that in the context of subsidy decline, this year's government work report clearly proposes to "continue to support the consumption of new energy vehicles", indicating that the country's attitude towards supporting the development of new energy vehicles has not changed, so we are still optimistic about the sales of new energy vehicles in the country this year to exceed 5 million.

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

("High-end Manufacturing - New Energy Vehicle Sales Continue to Grow In February, Ningde's Installed Capacity Share Declines Slightly", Report Date: March 15, 2022)

Catalonia era:

The fundamentals continue to improve, and the expansion of production and the development of new businesses are steadily advancing

We expect the company's installed power battery capacity to reach 125Gwh in 2022, with a global market share of 33%

Take the lead in launching the power exchange business, seize the first-mover advantage; rapid expansion of production to open up the upside of performance

Downstream demand remains strong and the leading position is solid: according to the data of the China Association of Automobile Manufacturers, the sales volume of new energy vehicles in the first two months of 2022 was 624,000 units (up 153.1% year-on-year), and the installed capacity of power batteries was 29.9 Gwh (up 110% year-on-year). In the first two months, Ningde's installed capacity was 14.7Gwh (up 91% year-on-year), with a market share of 49.2%, and its leading position was solid. According to SNE Research, the market share of global power battery installed capacity in the NINGDE era in 2021 is 32.6% (compared with 24.6% in 2020), further opening up the gap with LG New Energy (20.3%) and Panasonic (12.2%). We believe that China's new energy vehicles are still likely to achieve rapid growth (>50%) in the face of rising oil prices and subsidy reductions in 2022, so we maintain our expectation that China's new energy vehicle sales will be 5.3 million units in 2022. As the absolute leader in the power battery industry, CATL expects that the installed capacity of power batteries will reach 125Gwh in 2022, with a global market share of about 33%.

New business steadily advances to build a new moat: In January, NINGDE released a new power exchange brand EVOGO and a combined power exchange overall solution ("chocolate power exchange block"). The replacement block is a standard battery box with a power content of 26.5kwh (corresponding to an energy density of 160wh/kg), which can be used alone or in combination with multiple blocks. According to the company, the chocolate exchange block can adapt to more than 80% of the pure electric vehicle models that have been listed and will be listed in the next 3 years. We believe that ningde's launch of the power exchange business mainly has the following considerations: 1) mileage anxiety is still the core pain point of electric vehicles, and the promotion of the power exchange model can attract more customers to buy electric vehicles; 2) Ningde, as the first battery manufacturer to launch the power exchange business, can have a first-mover advantage in standardization; 3) Ningde can provide car owners with power exchange or other derivative services to increase revenue by operating power exchange stations. At the same time, superimposed on the release of sodium batteries last year, we believe that Ningde is building a more solid moat by continuously deriving its products and business models, further opening up the gap with second-tier manufacturers.

Capacity expansion accelerated, profit elasticity space increased: According to the announcement, the net profit attributable to the mother in 2021 of CATL was between 14 billion and 16.5 billion yuan (an increase of 150.8-195.5% year-on-year), which means that the net profit in the fourth quarter was 6.25-8.75 billion yuan (an increase of 181% -293% year-on-year), which was better than market expectations. We believe the strong performance is mainly due to: 1) the substantial increase in downstream demand for new energy vehicles and energy storage; 2) the strong control of upstream raw materials and supply chains to stabilize the gross profit margin level; and 3) the scale effect has led to an increase in operating efficiency (lower expense ratio). On the other hand, NINGDE continues to accelerate the pace of expansion, and we expect its total power battery production capacity to reach 316/734Gwh in 2022/25. In 2022, manufacturers have raised the factory price of power batteries and in the expectation of the rapid growth of high gross profit energy storage business, we believe that CATL has more room for performance growth, raising its net profit in 2021/22/23 to 150/273/374 billion yuan.

Risk warning: 1) sales of new energy vehicles are less than expected; 2) industry competition is intensifying; 3) raw material price fluctuations; 4) single market risk.

(CATL Times (300750 CH) - Fundamentals Continue to Improve; Expansion and New Business Development Advance Steadily, Report Date: March 15, 2022)

Doctor Ping An:

Optimize the C-end, focus on the B-side, and strategic transformation will help the company achieve its future medium-term goals

Core financial indicators for 2021 are in line with expectations

The company's deepening development benefits from new strategies and new business models

Core financial indicators for 2021 are in line with expectations. According to the 2021 annual report, the company's total revenue was RMB7.33 billion, an increase of 6.8% year-on-year, and the gross profit margin was 23.3%. Among them, the income from medical services was RMB2.29 billion, an increase of 8.0%, and the income from health services was RMB5.04 billion, with a growth rate of 6.3%. (The full year's net loss was RMB1.54 billion, mainly due to increased investment in channels, services and capabilities, with the company's cumulative registered users reaching 420 million (+13.4%), a cumulative consultation volume of 1.27 billion (+26.4%), and a cumulative number of paid users exceeding 38 million for the year, an increase of 6 million over the LTM data in the first half of the year.) The number of paying customers that continue to grow has helped boost the company's earnings expectations. The new strategy focusing on optimizing the C-side and focusing on the B-side accelerates the company's process of achieving medium-term goals. In terms of C-end service content, the company has dug deep into vertical fields, added specialized disease service packages, and provided flexible rights and interests of member products. After the implementation of paid consultation, the payment rate increased, and the five-star praise rate increased to 97.2%. Enterprises are the main payers for personal health management, so China's 310 million enterprise employee market is the company's current focus market. The company's goals for the next three to five years include: 1) reaching 50-60 million paying users; 2) double/triple arPU; 3) user retention rates of more than 40% (currently 30%+); and 4) healthcare services accounting for more than 50% of total revenue.

The unique advantages of the business model are conducive to the long-term development of the company. The overall business model of "HMO (payer) + family doctor member and +O2O (supplier)" determines the profit model of membership fee matching value-added service revenue, and enhances customer stickiness and improves the profitability of the company through the stratification and classification of customers and products. At present, the company's Ping An Health APP can achieve 7 * 24 hours of service; the company's offline service network, covering 3,600 hospitals (more than 50% are top three hospitals), more than 202,000 pharmacies (the national coverage rate is about 34%), more than 225 central warehouses, and in 140 cities to achieve 1 hour drug delivery, more than 1,700 physical examination institutions and other performance network covering the whole country. We believe that the company's online platform is more likely to develop healthily and rapidly in the context of continuous regulation of the industry.

Risk Warning: 1) Policy Uncertainty, 2) Fierce Competition In the Industry, 3) The Company's Business Development Slows Down Than Expected, 4) The Risk of Strategic Deepening Less Than Expected, 5) Potential Medical Claims Risk, 6) Failure to Retain Key Talent, and 7) Technology and Data Risk.

("Ping An Good Doctor (1833 HK) - Optimizing the C-end, Focusing on the B-End, and Strategic Transformation To Help the Company Achieve Its Future Medium-Term Goals", Report Date: 18 March 2022)

Poly Property:

The 2021 performance is in line with expectations, and the growth rate of third-party projects is eye-catching

Revenue/attributable net profit increased by 34.2%/25.6% year-on-year, in line with expectations

The growth rate of basic property management area is in line with expectations, and the growth rate of public construction projects is strong

Poly Property announces its 2021 annual results. The company achieved revenue of 10.78 billion yuan, an increase of 34.2% year-on-year, and net profit attributable to the mother of 850 million yuan, an increase of 25.6% year-on-year. The Company's revenue and profit performance is in line with its performance guidelines and our expectations.

The growth rate of basic property management area is in line with expectations, and the growth rate of public construction projects is strong. As of the end of 2021, the company's contracted/under-management area was 660 million square meters/ 470 million square meters, respectively, an increase of 15.7% and 22.4% year-on-year. The average property fee of the company's residential category for the whole year was 2.24 yuan / flat / month, an increase of 0.4% year-on-year. Third-party projects accounted for 57%/60% of the company's contracted area and area under management, which remained stable compared with previous years, with third-party project revenue increasing by 75.8% and property management revenue increasing by 8ppt to 34.4%. The company's basic property management revenue increased by 34.8% year-on-year to 6.67 billion yuan, mainly benefiting from the revenue growth rate of 81.8% year-on-year for public construction projects, slightly higher than we expected. The proportion of public construction projects in basic property service revenue increased by 5.7 ppt to 21.9% year-on-year. During the year, the company achieved a breakthrough in the field of hospital format projects in the field of public services.

The income performance of community value-added services is differentiated. The company's community value-added service revenue for the whole year was 2.3 billion yuan, an increase of 31.6% year-on-year, slightly lower than our expectations. Community value-added service revenue accounted for 21.3%, down 0.4ppt year-on-year. From the perspective of sub-businesses, Mercure's business revenue was 400 million yuan, a slight decline year-on-year, and the proportion of revenue fell by 5.7ppt to 17.5%; the community retail business achieved revenue of 480 million yuan, accounting for 20.9% of community value-added services, accounting for 1.1ppt compared with 2020. Community space, community convenience and other businesses performed strongly, up 193.1%/48.8% year-on-year, and the proportion of revenue increased by 8.8ppt/3.8ppt to 15.9%/32.6% respectively. The revenue/gross profit of value-added services in the community under management of the company's units was 5.4/1.7 yuan/flat/year, respectively, +3.8%/7.7% year-on-year.

The overall gross profit margin of cost reduction and efficiency increase was stable and exceeded expectations. In 2021, the company's overall gross profit margin was 18.7%, which was basically flat compared with the same period. Among them, the profitability of basic property management and community value-added services has improved: the gross profit margin of basic property services was 14.3%, up 0.1ppt year-on-year, benefiting from the slight increase in the unit price of property management; the gross profit margin of community value-added services increased by 1.1ppt to 31.4% year-on-year. Gross margin for non-owner value-added services declined 1.4ppt to 18.7%. The company's management expense ratio decreased by 0.3ppt year-on-year to 9.3%.

The dividend ratio has declined, and the expansion of third-party projects is expected to accelerate. The company plans to pay a dividend of 170 million yuan, corresponding to a 20% dividend payout ratio, down 15ppt year-on-year. The company reduces dividends, intends to accelerate mergers and acquisitions opportunities, and focuses on the layout of public construction projects. The company expects revenue growth rate of not less than 30% and net profit growth rate of not less than 20% in 2022, which is consistent with the previous performance guidelines.

Risk warning: The project is not as big as expected, and the development of community value-added services is not as expected.

(Poly Property (6049 HK) - 2021 Results Meet Expectations, Third-Party Projects Grow Brightly, Report Date: 17 March 2022)