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Since the second half of 2022, the lithium battery sector has fallen sharply. The two leading ternary cathode materials, Dangsheng Technology (300073) and Rongbai Technology (688005), had a market value of 57.23 billion and 69.783 billion respectively. However, as of today, Dangsheng Technology only has 21.450 billion left, and Rongbai Technology only has 14.808 billion (as of May 13, 2023).
Source: Yiniu.com, Dangsheng Technology (left), Rongbai Technology (right)
Dangsheng Technology and Rongbai Technology have today's situation, in fact, it is not wronged. In the final analysis, both corporate performance and the growth potential of the industry are not as good as before.
First, the dividends of the era of new energy vehicles have passed the peak
The main business of Dangsheng Technology and Rongbai Technology is lithium battery cathode materials, and their products are widely used in the field of automotive power batteries, energy storage batteries, and consumer lithium batteries.
In 2021, the new energy vehicle market will grow explosively. As upstream lithium battery material suppliers, Dangsheng Technology and Rongbai Technology have naturally gained a lot.
How rich is it?
As of 2022, Dangsheng Technology and Rongbai Technology have achieved revenue of 21.264 billion and 30.123 billion respectively; deducted non-net profit of 2.325 billion and 1.317 billion. Compared with 2020, in two years, the performance has increased by about 8-10 times!
Source: Public Data Collation
Behind the soaring performance in the past two years is the common result of both volume and price. But the problem is that after two years of revelry, things are very different now.
First of all, from a volume perspective, at the beginning of 2021, the retail market penetration rate of new energy vehicles in mainland China was only 8%. By November 2022, the penetration rate had reached 36%. In the past two years, the penetration rate of new energy vehicles has increased by four or five times.
However, it is easy to quadruple or fivefold from 8%, but it is difficult to continue to penetrate from 36%. According to the data, by April 2024, nearly a year and a half have passed, and the market penetration rate of new energy vehicles has only climbed to 43.7%.
Obviously, new energy vehicles have entered the channel of slowing growth.
Secondly, from a price point of view. In the past two years, stimulated by the surge in demand for new energy vehicles, the prices of the upstream and downstream of the industrial chain have skyrocketed. Taking lithium phosphate as an example, the price has been less than 100,000 yuan/ton and once approached 600,000 yuan/ton.
However, as downstream demand stabilizes and supply increases, the entire market gradually returns to rationality. Lithium batteries from raw materials to products, the price has been reduced across the board.
Source: Straight Flush iFinD
It should be noted that Dangsheng Technology and Rongbai Technology mainly produce lithium battery cathode materials. Among them, nickel, cobalt, manganese, lithium and other major raw materials need to be purchased externally. In other words, what the company earns is actually the money from the processing of raw materials. Theoretically, the price reduction of raw materials and products at the same time will not have much impact on the gross profit margin of the enterprise. In particular, Dangsheng Technology's gross profit margin in 2023 will be 18.06%, which is basically the same as in 2021 and 2022.
But the problem is that while price reductions won't affect gross margin too much, they will significantly affect the scale of revenue. In 2023, the revenue of Dangsheng Technology and Rongbai Technology will be -28.86% and -24.78% year-on-year respectively, which will shrink seriously.
Net profit was also significantly discounted due to revenue.
In addition, although the gross profit margin of enterprises has not been greatly affected by price reductions, it has also shown a downward trend. In the first quarter of 2024, the gross profit margin of Dangsheng Technology has decreased from 18.06% to 14.89%; Ronbay Technology has further decreased from 8.58% to 5.15%.
This is because the downstream of new energy vehicles frequently starts price wars, and the pressure to reduce costs has shifted to the upstream. As suppliers of lithium battery materials, Dangsheng Technology and Rongbai Technology naturally bear the brunt.
Second, over-reliance on large customers, gross profit margin is extremely low
It should be said that Dangsheng Technology and Rongbai Technology have not missed the dividends of the times. It's just that the peak has passed. However, in horizontal comparison, there is still a big difference between Dangsheng Technology and Rongbai Technology.
Dangsheng Technology originated from the research group of Beijing General Research Institute of Mining and Metallurgy, is an enterprise founded by scientific researchers, in 2002 mass production of the first generation of lithium cobalt oxide (LCO), and then gradually opened South Korea, Japan and other foreign markets. Today, the proportion of foreign revenue of Dangsheng Technology is still about 3%.
In contrast, Rongbai Technology started late. In 2014, its predecessor, Jinhe Lithium Battery, had just been established. But Rongbai Technology is a latecomer. As of 2023, the revenue of Rongbai Technology has reached 22.657 billion, far exceeding the 15.127 billion of Dangsheng Technology.
Source: Public Data Collation
Looking further, the secret weapon of Rongbai Technology to surpass Dangsheng Technology lies in customer one (presumably it should be CATL). In 2023, Rongbai Technology will contribute 14.185 billion yuan in revenue alone, accounting for 62.61% of the total revenue.
In other words, the revenue of only one customer of Rongbai Technology is close to the revenue of the entire company of Dangsheng Technology. Therefore, it is obvious that Rongbai Technology is holding the thigh of customer one to develop and grow.
Source: Flush 2023 annual data Rongbai Technology (left) Dangsheng Technology (right)
It's just that over-reliance on customers has indeed increased the revenue scale of Rongbai Technology, but at the same time, the profit level has also gone down.
Judging from historical data, from 2016 to 2023, the gross profit margin of Dangsheng Technology will basically be stable at about 18%. However, the gross profit margin of Rongbai Technology in 2022 will drop from 15.34% to 9.26%.
According to the brokerage research report, the decline in the gross profit margin of Rongbai Technology is mainly affected by the time mismatch of shipment rhythm and raw material price fluctuations. But the problem is that if it is caused by a time mismatch, then after a period of time, it will inevitably return to normal. However, the actual situation is that in 2023, the gross profit margin of Rongbai Technology will be 8.58%, which will continue to decline.
Source: Ping An Securities
So far, the gross profit margin of Dangsheng Technology and Rongbai Technology has pulled out a gap of nearly 10 points.
Not only that, as mentioned earlier, in the first quarter of 2024, affected by factors such as downstream price wars, the gross profit margin of Dangsheng Technology has dropped to 14.89%. At this time, the gross profit margin of Rongbai Technology was only 5.15%.
What is 5.15%?
The level of loss.
In the first quarter of 2024, Rongbai Technology will achieve revenue of 3.692 billion, which is about twice that of Dangsheng Technology. But when the rise of technology net profit of 100 million; The net loss of Rongbai Technology is nearly 40 million.
According to market rumors, the profit squeezing of upstream enterprises by customers is very exaggerated. Now it seems that I am afraid that what I said is true.
Source: Interactive Q&A platform - Rongbai Technology
3. Product iteration and upgrading, testing R&D strength
In general, the growth rate of market demand for lithium battery materials is slowing down, and the performance of enterprises is not as good as before. In the first quarter of 2024, Dangsheng Technology's revenue and net profit attributable to the parent company were -67.67% and -74.36% year-on-year respectively; Rongbai Technology was -55.88% and -111.98% year-on-year respectively, continuing to cut in half.
However, although the overall expectations of the industry have weakened, there are still structural differences. Judging from the data, the market share of NCM811 in China (nickel-cobalt-manganese ratio of 8:1:1) has increased from 2.0% in 2018 to 42.5% in 2022, and the trend of high nickel in ternary batteries is obvious.
In terms of high nickel, Rongbai Technology has more right to speak. Rongbai Technology is the first company in China to achieve large-scale mass production of NCM811, and its shipments of high-nickel ternary materials accounted for 90% of total shipments in 2021, ranking first in the country in terms of market share for many years.
However, NCM811 is neither exclusive nor the end of Rongbai Technology. At present, modern technology has also been promoting the iterative upgrading of ultra-high nickel products such as Ni90, Ni92, Ni93, Ni95 and Ni98. In addition, in the development process of solid-state batteries, high-nickel ternary, lithium manganese iron phosphate, and lithium-rich manganese-based cathode materials will become the main research and development directions in the future.
It can be seen that as the market puts forward higher requirements for cost reduction and energy density, cathode materials will continue to be iteratively upgraded. This poses a great challenge to the company's R&D capabilities.
However, the data shows that although the revenue scale of Rongbai Technology is higher, since 2022, its R&D investment has begun to lag behind that of Dangsheng Technology.
Source: Flush iFinD, Rongbao Technology (top) Dangsheng Technology (bottom)
If Rongbai Technology continues to lose money, I am afraid that it will be overwhelmed by R&D investment.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.