Subsidy retreat power battery industry performance differentiation

Subsidy retreats force the battery to reduce costs, while rising raw material prices further squeeze the profit margin of the industrial chain. Since the beginning of this year, operating pressures in many sectors of the new energy auto industry chain have increased dramatically. According to the data of the three quarterly reports, it is not uncommon for companies in the subdivided areas such as battery materials, electrolytes, and diaphragms, which are related to power batteries, to experience a significant slowdown in their business performance, a decrease in gross profit margin, an increase in non-increasing income, and a negative net profit growth. In contrast, benefiting from the increase in raw material prices, the share price and performance of upstream raw material manufacturers and cathode material manufacturers “flyed together”, and profits of many companies increased by more than 100%.

Analysts pointed out that under the double pressure of the pressure of back-off and the increase of raw material prices in the upstream, car companies will reduce their pressure on the power battery. Since the beginning of this year, the price of power batteries has dropped by 20% to 30%, and the pressure on the higher gross profit margin, overcapacity, and weaker bargaining power has been transmitted.

Clearly differentiated performance

From the perspective of the three quarterly reports, the subsidy retreat has had a certain impact on the performance of the vehicle companies.

Such as Jianghuai Automobile, the first three quarters of the revenue was 35.541 billion yuan, a slight decrease of 6.79% year-on-year; attributable to shareholders of listed companies net profit of 218 million yuan, a year-on-year decline of 73.24%. For the main reason for the decline in net profit from the same period of last year, Jianghuai Automobile stated that it was due to the decline in the subsidies for new energy vehicles and the decline in sales of passenger vehicles. Another example is BYD, whose revenue in the first three quarters increased by 1.56% year-on-year, and net profit attributable to shareholders of listed companies decreased by 23.82% year-on-year. Several brokerage analysts pointed out that the company’s short-term performance was under pressure, mainly due to factors such as subsidy and retreat, as well as increase in sales expenses and financial expenses.

“Whole vehicle companies have relatively strong discourse power in the industrial chain. After the new version of the subsidy program for new energy vehicles is implemented, vehicle manufacturers will gradually transfer the subsidy standard downward pressure to the upper reaches of the industry chain. This year, the midstream companies include batteries and electric motors. The price of the link products has been under greater pressure,” said a new energy auto analyst at a Shenzhen-listed stock brokerage firm.

Guoxin Securities analyst pointed out that the battery link to withstand the greatest pressure on the upstream and downstream industry chain. In 2016, the battery cost was about 2.2-2.3 yuan/Wh. In 2017, it dropped to 1.6-1.7 yuan/Wh, and the price of battery was reduced by nearly 30%.

Correspondingly, the data disclosed in the three quarterly reports showed that the performance of the companies in the battery, electrolyte, and separator segments related to power batteries has significantly slowed down, and the gross profit margin has declined, resulting in “increasing revenue without increasing profits”. It is not uncommon for net profit growth to be negative.

The diaphragm leading enterprise Star Source Materials, the first three quarters of operating income increased by 1.15% year-on-year, net profit attributable to shareholders of listed companies fell 25.73% year-on-year. Tianci Materials, which accounted for nearly 20% of the domestic electrolyte market share, saw operating income increase 13.96% year-on-year in the first three quarters, and net profit attributable to shareholders of listed companies fell 12.26% year-on-year. The company expects full-year 2017 net profit to change by -25%. To 5%. Lithium fluoride, the mainstream supplier of lithium hexafluorophosphate electrolyte solute, also appeared in the first three quarters of “increased revenue does not increase profits”, the first three quarters of operating income rose 17.4%, net profit fell 45.02% year-on-year, the company expects annual net profit Reduced by 50%-20% compared to the same period last year.

While benefiting from the increase in raw material prices, upstream raw material manufacturers and cathode material manufacturers appeared to have “shared their share price” and performance, and the profit growth of many companies exceeded 100%. The upstream raw material suppliers Huayou Cobalt, Yanfeng Lithium, and Greentech, the revenue in the first three quarters increased by 76.19%, 40.51%, and 40.34% over the same period of last year, respectively, and the net profit increased 413 times, 106%, and 92% year-on-year respectively. The stock price increases reached 175.72%, 226.77% and 49.11% respectively. Positive-electrode material manufacturer Ascension Technology, the first three quarters of revenue increased by 58.20% year on year, net profit increased by 192% year-on-year, this year's share price rose nearly one-third.

Multiple encounters

“This year, the entire power battery revenue is similar to last year, and the shipment volume is basically the same as last year. This is a big gap from the expectation at the beginning of the year. Since this year, new energy vehicles have been changing the runway from relying on all-electric buses to passenger vehicles. As for the main battery, the installed capacity of an electric bus is almost ten times that of a passenger car, and the production and sales of electric buses have fallen more than expected, causing the battery installed capacity to reach a level not expected at the beginning of the year. The rush to install at the end of the year may not be as prominent as in the previous two years.” Li Ke, a lithium analyst, pointed out that “With the same revenue tray, the subsidy decline will affect the overall profit of the industry.”

“Whole vehicle companies first felt the pressure to withdraw, but car companies have a large amount of power to speak, and they can require power battery makers to cut prices and force power batteries to strengthen cost control,” said an executive secretary of the company’s upstream raw materials told China Securities Journal. “This has also led to impetus. Battery manufacturers have been shuffled.This year, about 30 medium- and small-sized battery factories have been eliminated. The remaining power battery companies must control the cost, so they have to take advantage of high gross margins, excess capacity, and weak bargaining power. Such as diaphragms, electrolytes, and negative electrodes, prices have dropped sharply this year and there are downstream factors that lower prices."

Mo Ke pointed out that diaphragm companies are more uncomfortable. “The margins of the diaphragm industry in the past few years were too high. To reduce the cost of the battery plant, we must first move them. In addition, the industry’s high gross profit margin before the industry led to a large number of enterprises to expand production capacity, and gradually release the production capacity in the past two or three years, which also provided a downward pressure on the downstream. It is possible that this year, the gross profit margin of the diaphragm companies has fallen by a large margin, which is close to 30% year-on-year, and it is expected that prices will continue to decline next year."

For the negative electrode material and the electrolyte, the profitability of the industry has been greatly squeezed due to the increase in raw material prices and the lower prices. “Because of supply-side reforms, negative electrode raw material prices have risen rapidly since the beginning of this year, such as needle coke from current year's 3,500 yuan/ton currently rising to more than 15,000 yuan/ton. However, the anode material itself has a low gross profit margin and is in the entire industry chain. The discourse power in the system is weak, and it is difficult to transmit cost pressures. The overall price has been steadily declining this year due to the impact of lower prices. At present, some anode materials companies have faced profitability difficulties.” The above-mentioned stock-based securities dealer New Energy Auto analysts told China Securities reporter.

For the solute end (Lithium Hexafluorophosphate), a director of a listed new energy vehicle company, Dong Mi, pointed out that last year, the market demand was large, and the production capacity was not enough, so that the price of lithium hexafluorophosphate rose a lot. Since the beginning of this year, production capacity has gradually been released, the demand for products has decreased, and downstream prices have dropped, leading to a significant price drop. The price of lithium hexafluorophosphate sold at a high price of more than 300,000 tons per ton last year, and it currently sells only 140,000 tons. At the same time as the price fell, the prices of its main raw materials, hydrofluoric acid and lithium carbonate, were rising. For example, the quoted price of hydrofluoric acid has risen sharply from 6,000 yuan/ton at the beginning of the year to nearly 10,000 yuan/ton. Lithium hexafluorophosphate manufacturers have a hard time.

The price reduction of the solute end (lithium hexafluorophosphate) is further transmitted to the electrolyte manufacturer. Pacific Securities analyst pointed out that the price reduction of lithium hexafluorophosphate led to the simultaneous drop in the price of the electrolyte, the price fell from 80,000 yuan / ton to 50,000-5.5 million / ton.

“The cathode material manufacturers have had a comfortable day, especially producing triple-cell batteries. In the previous two years, the cathode plant was rather miserable, and the gross profit margin could reach 10%, which is not bad. Basically, it does not make money, and the downstream has not given rise to price increases. This year, with this wave of raw material prices, the positive factory took the opportunity to raise the price, and the previous gross profit margin was basically restored. The current gross profit margin can probably reach 20%-30%,” said Mo Ke.

Profitability will improve

According to the Notice on the Financial Support Policies for the Promotion and Application of New Energy Vehicles from 2016 to 2020, the new energy vehicle subsidy standard will be reduced by 20% from 2016 to 2018, and the subsidy standard will be based on 2016 from 2019 to 2020. On the decline of 40%.

“There are rumors that the 2018 will be retired 20% ahead of schedule on this year. If the news is true, it will put pressure on the entire industrial chain. We exchanged information with some vehicle manufacturers and learned that they are prepared to further bear the pressure of retreat if next year. Retreat by 20%, they will bear more cost pressures and reduce the pressure on some of the midstream links to ensure the balanced development of the entire industry chain.” One analyst told the China Securities Journal reporter.

Analysts at a large share-based securities brokerage pointed out that the overall decline in raw material costs upstream of the power battery is less likely to be maintained at high levels. “In the overseas markets, MB belts are rising, downstream rigid demand is strong, and domestic and foreign price gaps are being restored, the domestic cobalt product prices are expected to continue to rise. In terms of lithium carbonate, the expansion of South American production capacity in the previous two years will be released on a large scale, and carbon dioxide will be released in the second half of next year. Lithium prices may enter the downward path; the prices of graphite and nickel depend on the rhythm of supply-side reform next year."

For companies that have been squeezed by downstream costs and raw material prices, the industry sources pointed out that the industry's profitability will improve. With the rapid growth of demand driven by the production and sales volume of electric vehicles next year, and the support for the prices of upstream hydrofluoric acid, lithium carbonate and other raw materials, the price of lithium hexafluorophosphate is expected to continue to be explored in a short space, and the electrolyte price is expected to stabilize. "It is expected that the negative trend of the negative electrode plant may also be improved. Purchasing is generally conducted on an annual basis and prices will be discussed next year. The cost factor will be included and the negative electrode prices may be raised."

"For the diaphragm segment, with further pressure from the battery plant and the influx of industry competitors, it is expected that the price of diaphragm will continue to decline next year. Only through technological R&D to improve the product's yield rate can the company survive," said Mo Ke.

The “Energy-saving and New Energy Vehicle Technology Roadmap” proposes that by 2020, the energy density of pure electric new energy vehicles will reach 350Wh/kg, and the cost of the battery system will reach RMB 1/Wh. After this round of cost reduction, the cost of power battery is still far from the target. GF Securities analyst pointed out that in the market-based competitive landscape, companies rely on continuous innovation and upgrading, and launch high-quality products to increase their core competitiveness, drive sales growth, and absorb the direct impact of terminal subsidy reduction.

The Ministry of Industry and Information Technology recently announced the fuel economy compensation policy. In 2016 and 2017, the company’s average fuel consumption negative scores cannot be paid back to zero, which will affect the production of excessive fuel vehicles and the launch of new products. Affected by this news, the New Energy Vehicle Index changed the downward trend since October 9 and rose continuously for three consecutive trading days. Many agencies pointed out that the new energy automotive industry chain will usher in the air.

Third quarter earnings

In the third quarter, the performance of new energy vehicle theme funds has achieved record frequency. Wind data shows that, in addition to newly established funds that have not yet completed Jiancang, of the 22 new energy vehicle theme funds, the returns of 7 funds in the third quarter were more than 30%, accounting for 31.82%. Among them, the rich country China Securities New Energy Vehicle B's yield is as high as 92.49%, China National Securities New Energy B's yield is 73.60%, Penghua China New Energy B's rate of return is 60.14%.

As of November 8th, according to statistics of Wind, the cumulative returns of the above 22 new energy auto funds have been positive since the beginning of the year, and 12 funds have yielded more than 15% since the beginning of this year; two funds with better yields - Xinda In the new energy industry of Aussie Bank and the wealthy China National Securities New Energy Vehicle B, the yield rate reached 47.99% and 31.09%, respectively.

The third quarterly report of the fund shows that the recent preference for several new energy vehicle theme funds is slightly different. Cinda ADB's new energy industry focuses on Li-ion battery module maker Xinwangda and some electronic component manufacturers; Fuguo Zhongxun New Energy Automobile B is a heavy-duty lithium battery, Tianqi Lithium and other lithium battery upstream raw materials Enterprises, while holding a large amount of vehicle production companies such as BYD and Yutong, Penghua Zhongxin New Energy has also invested in TBEA, Tianqi Lithium and BYD, as well as TBEA, China Nuclear Power, etc. Electrical power grid stocks.

Expected air intake

The recently released 2016 and 2017 fuel-fuel credit related policies have attracted attention. In response, Ping An Securities believes that this policy is a continuation of the dual-point policy and it is expected that the new energy automobile industry will usher in rapid growth and maintain the production and sales expectation of 500,000 passenger vehicles in 2017. With the continuous growth of new energy vehicle production, in the long term, the downstream demand for lithium carbonate will be huge, and the power lithium battery will still be in a high growth cycle. It is recommended to pay attention to the opportunities for silicon carbon negative electrode application promotion brought by Model3 mass production, and the increase in cobalt price. The triple-infiltration accelerated the dual-drive of high-nickel ternary materials and their prices have risen.

According to Liang Chao, the chief analyst of Guoxin Automotive, the new energy bus subsidy catalog has been slow to release since the beginning of the year. In the first half of the year, both cash flow and order status in the industry were cold. In the second half of the year, the subsidy list will be adjusted. In 2018, industry subsidies will not fall back and the industry cost will drop in 2017, which will drive the steady growth of EPS in the industry. At present, it is still a good time to lay out new energy buses. It is recommended that mid- and long-term attention should be paid to lithium-ion, high-end lithium-electric equipment manufacturers, and leading vehicle manufacturers at both ends of the industrial chain.

Feng Mingyuan, manager of Cinda New Energy Industrial Fund, reminded investors that this year's market style has the characteristics of a shocking market and a structural bull market, and the growth of new energy vehicles and other sectors is relatively large. The field of new energy vehicles is still in the early stages of development. There are many entrants and the industry is fiercely competitive. It requires more careful screening of investment targets.

Li Wenjing, an open-source securities analyst, pointed out that the policy supports the continued healthy development of the new energy auto industry and long-term optimistic about the new energy auto industrial chain. In the short term, the fourth quarter is the peak season for new energy vehicles. Judging from the fourth quarter, the production and sales volume will increase significantly in the fourth quarter. It is recommended to pay attention to the lithium upstream raw material companies with outstanding resource advantages, and have the advantage of scale, high technical threshold and enter the supply chain of new energy passenger vehicles, and leading auto manufacturers with competitive advantages.

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