The market value has shrunk by 230 billion! Lithium prices have plummeted, and Ganfeng Lithium cannot escape the cyclical dilemma?
A new round of downward trend in lithium prices is likely to take place in the last two months of this year.
On November 17, the latest price of battery-grade lithium carbonate was 147,000 yuan/ton, a two-year low.
From the perspective of the extended cycle, from 500,000 yuan/ton at the beginning of the year to less than 150,000 yuan/ton today, the price of battery-grade lithium carbonate has fallen by more than 70% in the past year, even compared with 315,000 yuan/ton in the middle of the year, the price of lithium has been "cut in half".
With the collapse of lithium prices, Ganfeng Lithium, one of the industry giants, has also been greatly impacted. Judging from the latest disclosure of the third quarter report, Ganfeng Lithium's revenue and net profit declined in the first three quarters of this year - revenue was 25.68 billion, down 6.99% year-on-year, and net profit was 6.01 billion, down 59.38% year-on-year. It is worth mentioning that in the first half of this year, Ganfeng Lithium's revenue still increased by 25.63%.
In the years when the new energy automobile industry broke out, Ganfeng Lithium, as the "lithium king", can be said to have eaten up the industry dividends, with revenue climbing from 5.524 billion in 2020 to 418.2 billion in 2022, and its revenue has increased by about 8 times in just two years. However, as the industry enters a downward cycle, Ganfeng Lithium has also been counterattacked. From the current point of view, in the case of overcapacity in the industry, the risk of Ganfeng Lithium, which has huge production capacity, has increased sharply.
It is inevitable to escape the law of cycles
Everything has a cycle, and lithium, as one of the important mineral resources, naturally has a cycle law.
The cyclical law of lithium is closely related to supply and demand. When the industry enters the upward cycle, the price of lithium will soar, and then attract a lot of funds to "enter the market", the overall production capacity of the industry will expand rapidly, and then the supply and demand will gradually move towards a balance, and the price of lithium will also come to the peak;
In recent years, in the context of the outbreak of new energy vehicles, lithium has also experienced two rounds of cycle changes. The first round was before 2016, when the new energy vehicle market was in the ascendant, and the lowest lithium price was only 30,000 yuan/ton, and then under the stimulation of subsidies, the new energy vehicle market began to break out, and the lithium price also began to soar, from the lowest 30,000 yuan/ton to the highest 150,000 yuan/ton, until 2018, it began to "turn off".
The second cycle is starting in 2020. With the gradual maturity of new energy vehicle technology, the demand for new energy vehicles has surged again, coupled with the reduction of lithium battery supply in special environments, lithium prices have once again ushered in an explosion. According to media statistics, the price of lithium was only 40,000 yuan/ton at the beginning of 2020, and by 2022, the price of lithium has soared to a maximum of 600,000 yuan/ton, and the price of lithium has increased 15 times in just two years.
However, in the context of the major lithium battery giants greatly expanding their production capacity, lithium prices began to fall sharply after a short-term surge. According to the data, as of November 17, the latest price of battery-grade lithium carbonate was 147,000 yuan/ton, a two-year low. From the perspective of the extended cycle, from 500,000 yuan/ton at the beginning of the year to less than 150,000 yuan/ton today, the price of battery-grade lithium carbonate has fallen by more than 70% in the past year.
Under the influence of the cycle, the performance of lithium giant Ganfeng Lithium has also fluctuated significantly. Taking the first round of cycle change mentioned above as an example, in 2015, Ganfeng Lithium's revenue was 1.354 billion and its net profit was 125.2 million, and in 2018, when lithium prices reached its peak, Ganfeng Lithium's revenue increased to 5.004 billion and its net profit also increased to 1.341 billion, with revenue increasing nearly 4 times and net profit increasing 10 times in 3 years.
In 2019 and 2020, Ganfeng Lithium's performance also began to fall into a bottleneck.
In the past two years, Ganfeng Lithium's revenue growth rate was 6.75% and 3.41%, and the net profit growth rate was -8.7% and -73.3% respectively. Although Ganfeng Lithium is already the industry leader, it is not difficult to see from the changes in performance that Ganfeng Lithium has still not escaped the cyclical law.
The risks behind it
Affected by the downward cycle, Ganfeng Lithium handed over a three-quarter report that was not good.
In addition to the above-mentioned "double decline" in revenue and net profit in the first three quarters, in terms of a single quarter, Ganfeng Lithium achieved revenue of 7.537 billion in the third quarter, with a growth rate of -42.77%, and a net profit of 159.7 million, with a growth rate of -97.88%, which can be described as a "thunderstorm".
Judging from the profit margin data, the gross profit margin of Ganfeng Lithium in the third quarter was 4.94%, and the net profit margin was 0.43%, you must know that in the third quarter of last year, the gross profit margin of Ganfeng Lithium was as high as 50.86%, and the net profit margin reached 58%, which shows how big the impact of lithium prices on Ganfeng Lithium is great.
In fact, in addition to the decline in performance, the impact of this round of downward cycle on Ganfeng Lithium may not have been fully reflected. On the one hand, this round of lithium price decline has just begun, according to the analysis of the CICC Research Report, it predicts that the global lithium supply and demand pattern will usher in a reversal from 2023 to 2023, and it is expected that the global lithium price will show a volatile downward trend from 2023 to 2025, in other words, Ganfeng Lithium's performance may continue to decline.
On the other hand, at present, Ganfeng Lithium's substantial expansion of production capacity in the past few years has not yet landed, and there is a high probability that there will be overcapacity in the future. As of the third quarter of this year, Ganfeng Lithium's construction projects are 14.05 billion, while its fixed assets are 7.839 billion; if the 14.05 billion construction projects are completed, Ganfeng Lithium's production capacity will be on a new level, but due to the demand side, these production capacity is likely to become a burden.
As mentioned in the above content, with more and more capital pouring into the lithium battery industry, the entire industry has obviously exceeded demand. Zhu Huarong, chairman of Changan Automobile, publicly said that it is expected that by 2025, China will need 1000GWh ~ 1200GWh of power battery production capacity, but the current industry capacity planning has reached 4800GWh, which shows that the current power battery industry is obviously oversupplied.
Perhaps the prospects of the lithium industry are indeed not optimistic, and the stock price performance of Ganfeng Lithium in the past two years has not been satisfactory. As of the close of trading on November 17, Ganfeng Lithium's share price closed at 44.05 yuan per share, with a total market value of 88.9 billion. Compared with the highest point of 159.06 yuan per share in June 2021, in just over two years, Ganfeng Lithium's share price has fallen by more than 70%, and its market value has evaporated by more than 230 billion.
Will "integration" be the best way forward?
From the current point of view, because the production capacity has not been fully released, the most pessimistic time for the lithium industry has not yet come.
In this case, it is obviously unrealistic to wait for the arrival of the next round of upward cycle, so Ganfeng Lithium also chooses to transform and take the "integration" route.
On the night of the release of the third quarterly report, Ganfeng Lithium announced simultaneously that it has reached an investment agreement with the People's Government of Nanchang Xinjian District, and intends to invest in the construction of a lithium battery production base project in the new Economic Development Zone of Nanchang City, of which the first phase of the planned land is about 150 acres, and the construction of an annual output of 5GWh energy storage PACK battery production base, with a planned investment of no more than 2 billion yuan, and the second and third phases will be timely invested in the construction of power batteries and energy storage battery production bases according to market conditions.
In addition, Ganfeng Lithium also announced that it has reached a strategic cooperation with Anda Technology. The two parties jointly established a joint venture company to invest in the construction of a lithium iron phosphate cathode material manufacturing project with an annual output of 20,000 tons, with a registered capital of 50 million yuan, with Ganfeng Lithium holding 40% of the shares and Anda Technology holding 60% of the shares.
In fact, in the past year, the development of "integrated" business has become the core of Ganfeng Lithium, especially in the battery business. According to the financial report, in the first half of this year, Ganfeng Lithium's lithium battery series products achieved revenue of 4.085 billion yuan, a year-on-year increase of 117.31%, accounting for 22.51% of the overall revenue, an increase of 9.49 percentage points over the same period last year, and the gross profit margin of the sector was 19.41%, an increase of 4.14 percentage points year-on-year.
It is true that the transformation from a lithium giant to an integrated giant can indeed improve its own risk resistance and reduce the risk caused by the downward trend of lithium prices.
However, at present, lithium batteries are also in a state of oversupply, and if you want to transform to integration, then Ganfeng Lithium needs to compete with battery giants like Ningde Times, which is not easy for Ganfeng Lithium, in the first three quarters of this year, Ganfeng Lithium has invested 941.6 million in research and development, and last year's research and development expenses were 1.007 billion, which shows that to complete the transformation, Ganfeng Lithium needs to pay a lot of price.
From the current point of view, Ganfeng Lithium is facing the pressure of overcapacity on the one hand, and the continuous decline in lithium prices on the other side has also had a huge impact on Ganfeng Lithium, Ganfeng Lithium has fallen into a "dilemma" situation, although integration is indeed a good way out, but in the case of lithium batteries are also oversupplied, it is not easy for Ganfeng Lithium to get out of the current predicament.