(Image is AI-generated)
Under the background of the increasing "involution" of the lithium battery industry chain, CNGR Co., Ltd. (300919. SZ) again submitted a growth report card.
On April 24, CNGR released its annual report, with operating income of 34.273 billion yuan in 2023, a year-on-year increase of 12.95%, and net profit attributable to shareholders of listed companies of 1.947 billion yuan, a year-on-year increase of 26.15%. At the same time, the company continues the tradition of dividends, and plans to distribute 11.6 yuan (tax included) to all shareholders for every 10 shares converted to 4 shares, with a dividend of 772 million yuan.
In fact, since its listing in 2020, CNGR's performance has increased year after year, with revenue and net profit jumping from 7.44 billion yuan and 420 million yuan in 2020 to the current level, more than 4 times in three years.
Dismantling the 2023 annual report, CNGR's growth logic is relatively clear: benefiting from the rapid development of the global new energy vehicle market and the high demand for ternary precursors, in this context, the company continues to accelerate globalization and integrated layout, quickly respond to customer needs with production capacity and technical advantages, and deeply bind Tesla, LG Chem and other head customers, and increase its scale and profitability at the same time.
Overseas performance contributed mainly to the increase
CNGR is mainly engaged in the research and development, production, processing and sales of lithium battery cathode material precursors, including ternary/iron phosphate precursors and cobalt tetroxide. Ternary precursor is the key material for the preparation of ternary cathode, iron phosphate precursor is the material for the preparation of lithium iron phosphate cathode, and cobalt tetroxide is a lithium cobalt oxide precursor material.
In recent years, with the rapid development of the global new energy vehicle market, cathode materials, as a key part of the lithium battery industry chain, have improved their prosperity, and the performance of related listed companies has risen sharply, and CNGR is no exception.
However, in 2023, with the influx of a large amount of capital into the lithium battery industry chain and the continuous expansion of production, the competition in the entire industrial chain will become increasingly fierce, and the cathode material link will inevitably be "involuted", the price war will continue, and the performance of many enterprises will decline. Taking ternary precursors as an example, SMM data shows that in 2023, the average price of ternary precursor 523 will be 82,000 yuan, down 34% from 2022.
In terms of overall demand, due to the substitution of iron and lithium for low-end products, as well as the increase in the proportion of high-nickel and medium-nickel high-voltage materials used in high-end models, the unit consumption of materials has decreased, and the output of ternary precursors has decreased. According to Xinchun information data, in 2023, the global ternary precursor output will be 968,000 tons, a year-on-year decrease of 4.9%, and China's ternary precursor output will be 833,000 tons, a year-on-year decrease of 5.6%, but China still accounts for more than eighty percent of the world's supply share, and the CR4 concentration will reach 70.5%, and the head concentration trend is becoming more and more obvious.
In the face of fierce competition in the domestic market, the entire lithium battery industry chain, including ternary precursors, is aiming overseas and going overseas has become a trend. Focusing on CNGR, its performance growth will be able to achieve in 2023 when the global production of ternary precursors is declining and prices are declining, and its global layout has contributed to it.
According to the annual report, in China, the company has established four major industrial bases in Tongren, Ningxiang, Qinzhou and Kaiyang, covering the whole country, and overseas, the three major nickel ore processing bases in Indonesia have been put into operation, and the construction of industrial bases in South Korea, Morocco and Finland is progressing in an orderly manner. The company's business covers Japan, South Korea, Southeast Asia, Europe, North America and other countries and regions, and has renewed long-term purchase and sales contracts or supply agreements with core customers such as LG Chem and Tesla.
In March 2024, the company also signed a battery recycling business cooperation agreement with Doosan Recycling Solution in Frankfurt, Germany, to cooperate on lithium extraction from battery black powder, and establish a long-term and stable cooperative relationship through an off-take agreement, combining the technical advantages of both parties in their respective fields to jointly promote the development of recycling business; A more environmentally friendly way to recycle used batteries.
In terms of regions, overseas performance has become the main increment of CNGR. In 2023, the company's revenue in China will be 20.706 billion yuan, accounting for 60.42% of total revenue, a year-on-year increase of 2.89%, while the revenue of South Korea and other countries and regions will be 6.962 billion yuan and 6.605 billion yuan, accounting for 20.31% and 19.27%, respectively, a year-on-year increase of 51.25% and 17.61%. In terms of the proportion of revenue, the proportion of overseas revenue has increased from 33.68% in 2022 to 39.58% in 2023.
(CNGR's revenue composition by region, source: 2023 annual report)
In terms of gross profit margin, overseas is also significantly higher. In 2023, the company's gross profit margin on sales in China will be 12.21%, and the gross profit margin in South Korea and other countries and regions will be 17.65% and 15.45%.
The higher overseas gross profit margin is partly due to the higher selling price of products. The annual report disclosed that last year, the company's overseas sales revenue of ternary precursors was 10.443 billion yuan, the sales volume was 92,800 tons, and the average overseas price was 112,600 yuan/ton, which was significantly higher than the domestic price.
The increase in overseas business has led to the continuous increase of the company's market share. According to the data of Xinchun Information, in 2023, the company's ternary precursor market share will be 27%, continuing to maintain the first place in the industry.
Integrated layout to reduce costs
In addition to the global layout, CNGR has accelerated the vertical integration of "mineral resources refining, mineral resources refining, precursor material manufacturing, and new energy material recycling". While strengthening the guaranteed supply of key raw materials, through industrial integration, we can effectively reduce comprehensive production costs and improve product profitability.
Generally speaking, direct materials account for the majority of the cost of lithium battery cathode precursor materials. CNGR disclosed that its operating cost of lithium battery cathode precursor materials in 2023 will be 29.495 billion yuan, of which the direct material cost will be 26.588 billion yuan, accounting for 90.15%, the direct labor cost will be 405 million yuan, accounting for 1.37%, and the manufacturing cost will be 2.502 billion yuan, accounting for 8.48%.
According to the annual report, the company has mastered the upstream smelting technology oxygen-rich side blowing + RKEF dual technical route, in order to effectively open up the front-end and back-end smelting links, the company has actively promoted the investment and construction of nickel smelting capacity in the four major bases of overseas Indonesia Morowali, Weidabei, South Kalimantan, and North Morowali, as well as the domestic industrial bases of Tongren, Ningxiang and Qinzhou, so as to realize the diversification of nickel powder/bean, low ice nickel, high ice nickel, MHP and other nickel raw material refining, and realize the full line of the industrial chain from the resource end to the material end. Laterite nickel ore - low ice nickel - high ice nickel - nickel sulfate - high nickel ternary precursor".
According to the company's existing production capacity, under construction and planned production capacity, on the material side, the company will build nearly 400,000 tons/year of ternary precursor production capacity, 25,000 tons/year of cobalt tetroxide production capacity and 200,000 tons/year of iron phosphate production capacity by the end of 2023, and on the resource side, the company's nickel resources under construction and the construction capacity of the crude end of completed resources will reach 195,000 metal tons.
(CNGR's production capacity, source: 2023 annual report)
The increase in the proportion of industrial integration directly leads to the increase in gross profit margin, which has been reflected in the annual report. In 2023, the company's gross profit margin will be 13.94%, an increase of 2.41% year-on-year. Among them, the gross profit margin of ternary precursors was 17.96%, an increase of 5.36% year-on-year.
Of course, regardless of globalization or integration, the increase in market share depends on product quality, and the achievement of quality lies in technology and innovation.
In 2023, CNGR will increase its R&D investment, with R&D expenses of 1.056 billion yuan, an increase of 13.62% year-on-year, and the number of R&D personnel will also increase from 945 in 2022 to 1,661 in 2023.
According to the annual report, the company has established a forward-looking R&D direction by tracking the downstream market and customer needs, and has achieved full coverage of the four major systems of nickel-based cobalt, phosphorus and sodium, and all of them have achieved mass production. In 2023, the company's products will be shipped more than 270,000 tons, of which more than 130,000 tons will be shipped of ternary precursor high-end products (8 series and above), and the high-end product structure will continue to be optimized. (This article was first published in Titanium Media APP, author|Su Qitao)