Following the rise and fall of the stock price of CATL, its first quarterly report for 2022 disclosed on April 29 set off another wave of outside attention. When talking about the decline in net profit and gross profit margin of the Ningde era in the first quarter, there are views that this marks an inflection point in the rapid growth period of the Ningde era; but there are also views that it is only a short-term trough encountered in the Ningde era.
So, which view is more accurate? Of course, a comprehensive and accurate conclusion cannot be drawn from just one report. On the one hand, when the data of the entire industry and other similar battery companies are introduced, it can be intuitively found that the market foundation of CATL has not been shaken. On the contrary, its market share has further increased, and its leading position in the industry has become more stable in the first quarter.
At the same time, around the long-term factors such as technology and cost control ability that affect the performance of enterprises, CATL has undoubtedly built a wide enough “moat”, so it faces little competitive pressure from its peers, and its performance is fundamentally consistent with the entire new trends in the energy industry. By judging the overall trend of the new energy industry, it can be believed that the Ningde era has the ability to continue to explode in future performance.
On the other hand, although the skyrocketing price of raw materials is an objectively huge challenge, the decline in net profit in the first quarter is largely an active choice of CATL to win the grand strategic goal.
The reason why I say this is because I chose to bear a lot of cost pressure by myself. Although it affects the short-term profit level, it helps to maintain the high-speed and healthy development momentum of the entire industry. This is in line with the long-term interests of CATL.
It is worth noting that although the profit level reflected in the first quarterly report of CATL itself is downward and not optimistic, the logic behind this quarterly report is likely to become CATL’s capital market. A new “stepping stone”.
The essence of market value is capital’s advance estimate of the company’s long-term development status. Through this first quarterly report, investors can clearly see that they focus on long-term benefits, The strategic vision of fundamental interests, and this is the key advantage that CATL can continue to win the favor of the capital market in the future.
The report for the first quarter of 2022 shows that the total operating income of CATL during the reporting period was 48.678 billion yuan, a year-on-year increase of 153.97%; the net profit attributable to shareholders of listed companies was 1.492 billion yuan, a year-on-year decrease of 23.62%; the gross profit margin was 14.48%, The chain ratio also decreased significantly.
Judging from the first quarter report, the direct reason for the decline in net profit of CATL in the first quarter was that the growth rate of operating costs was too fast, with a year-on-year growth rate of 198.66%, far exceeding the growth rate of operating income. The significant increase in operating costs was mainly due to the increase in sales and the rapid increase in the prices of some upstream materials, of which the increase in sales is a normal factor, while the rapid increase in the price of upstream materials is an abnormal factor.
Generally speaking, when the sales of new energy vehicles are growing rapidly and the market demand is strong, it is normal for the price of lithium battery raw materials to rise. But the problem is that the current increase in raw material prices has been too outrageous, deviating from the law of supply and demand, and abnormal growth, which has adversely affected the healthy development of the entire new energy vehicle industry.
The surge in raw materials has emerged from the most upstream mining links such as lithium, cobalt, and nickel, and has been conducted down step by step. The price of lithium carbonate at the end of 2021 is 275,000 yuan / ton, and the highest price at the end of the first quarter of 2022 is 503,000 yuan / ton, an increase of over 80%. According to calculations, for every 100,000 yuan increase in the price of lithium carbonate, the average cost of power batteries per GWh increases by about 52 million to 62 million yuan.
The Ningde era did not follow the trend of price adjustment at the first time of the upstream price increase. Even when the price of raw materials is extremely outrageous, the Ningde era still digested a considerable price increase by itself. This has also become an important reason for the decline in net profit and gross profit margin of CATL in the first quarter.
In fact, CATL has every opportunity to avoid the impact of skyrocketing raw material prices on the company’s profits. After all, the Ningde era is not the end of the entire industrial chain, and it can choose to transmit all the pressure of price increases to the further downstream OEMs. Moreover, from the perspective of product and technological competitiveness, CATL is also feasible to do so.
However, the Ningde era did not do this. “In order to maintain the healthy and healthy development of new energy vehicles and the power battery industry, we are very cautious in price.” Jiang Li, deputy general manager and secretary of the board of directors of CATL, said about the first quarter report that CATL has always been relatively pricey for products. Cautious, so in the face of upstream price increases, the company’s preferred method is to bear the cost pressure by itself. The growth rate this year has been too fast and too fierce, and the company has also chosen to work with customers to face the pressure and dynamically adjust the price.
OEMs directly face consumers and reduce the cost burden of OEMs, which is to avoid the impact of rising raw material prices on the increasingly mature end market, which will help boost industry confidence and maintain the momentum of rapid development of the new energy vehicle market. As the overlord of the lithium battery industry, CATL will also be one of the biggest beneficiaries of a benign external environment.
Force both supply and demand to promote the industry to return to the right track
It is worth noting that the important reason why CATL dares to resist cost pressure is that it has seen the general trend of the market – the abnormal price of upstream raw materials cannot continue for a long time. From a longer time line, the current The situation is just a “small episode” in the rapid development of new energy vehicles.
From the supply side, upstream raw materials do not have technical or technological particularity, and the root cause of insufficient supply is only limited production capacity. In the past two years, driven by profits, upstream companies have begun to deploy a large number of new production capacity. Taking lithium salt as an example, the research report of China Merchants Bank Research Institute predicts that in the short term, in 2022, the supply of lithium salt will be in short supply, and the price will remain high under strong demand; from 2023 to 2025, with the rapid release of production capacity, the supply will exceed the demand, and the price will remain high. There is a staged decline.
Before the new production capacity of raw materials is released, it is particularly critical to plan ahead. CATL has avoided the risk of being “stuck in the neck” by upstream resources in advance through extensive deployment of raw materials.
According to statistics, from the beginning of 2020 to the end of 2021, CATL invested a total of 11.9 billion yuan in the upstream and downstream of the industrial chain, of which 9.6 billion yuan was equity investment. Of the 9.6 billion yuan, 2.4 billion yuan was used to strengthen the supply of raw materials. CATL has successively invested in Tianyi Lithium, Zhenhua New Materials, North American Nickel, Tianhua Times and other dozens of companies in the field of raw materials.
“With the release of production capacity, the fall in prices should be part of the trend. It is expected that the relationship between supply and demand will be better reversed in the second half of this year,” said Jiang Li.
In addition, in the entire supply chain, there is malicious speculation in the power battery raw material market, and some traders earn a very high price difference in the middle. Recently, the regulatory authorities’ crackdown on malicious speculation has also played a role in stabilizing the market price of raw materials.
“The Ministry of Industry and Information Technology, the National Development and Reform Commission, the Association, and some other institutions have done a lot of work in response to the rise in material prices to varying degrees. After a month of hard work in March, the price of lithium carbonate has basically stabilized.” At the monthly information conference of the Association, Ma Xiaoli, deputy secretary-general of the China Automotive Power Battery Industry Innovation Alliance, said.
From the demand side, new car manufacturing is not the only use case for lithium batteries. Under the encouragement of policies, power exchange is also becoming a hot topic in the new energy industry in the future. Swapping electricity to extend the life cycle of more lithium power batteries will help reduce the demand for new lithium batteries in the society, thereby curbing the unreasonable prices of upstream raw materials and accelerating their return to normal.
In addition to helping raw material prices get back on track, power swapping itself is an emerging market with great growth potential. Although battery swapping is not a new thing, the battery swap stations deployed by car companies such as BAIC New Energy and Weilai have all provided services for their own brands. This year, Ningde Times also officially entered the power exchange, and its power exchange service is suitable for a variety of models, which will promote the unification of power exchange standards and release greater market potential.
CITIC Securities predicts that the power exchange industry will enter a period of rapid development from 2022, and 3,000 new power exchange stations are expected to be added nationwide in 2022. Founder Securities predicts that by 2025, the sales of battery-swapped passenger vehicles will exceed 2.8 million, the demand for supporting swap stations will be about 28,000, the demand for supporting batteries will be about 55GWh, and the total industrial chain scale will be about 332.1 billion yuan.
The leading position is stable, and the system competitiveness supports future performance
Although the net profit in the first quarter decreased, the leading position of CATL in the entire market was more stable. Data shows that in the first quarter of 2022, the installed capacity of power batteries in my country is about 46.87GWh, and the market share of CATL exceeds 50%, continuing to rank first in the industry. At the same time, its global market share has also increased from 32.6% at the end of 2021 to the current 35%, further opening the competition gap.
For power battery companies, the amount of production and sales not only means the level of income, but also the strength of the scale effect, and the scale effect directly determines whether the company has strong cost control capabilities.
In order to support the growth of sales, CATL has also started the construction of a large number of new production capacity. On April 29 this year, the 45 billion yuan fixed increase plan of CATL was approved by the China Securities Regulatory Commission. The funds raised will be used for projects such as 135 GWh lithium battery capacity construction. The capacity projects include Fuding Times, Guangdong Ruiqing Times Phase I, Phase IV of Jiangsu Times and four production bases of Ningde Jiaocheng Times.
Technically, in the first quarter of this year, research and development expenses were 2.568 billion yuan, a year-on-year increase of 117.49%. By the end of 2021, CATL has more than 10,000 R&D personnel, more than half of whom are young R&D forces under the age of 30.
Different from traditional battery companies, the track where CATL is located is located in the center of the transformation of the new four modernizations in the automotive industry. It should be counted as a technology company driven by technology. CATL has the core competitiveness of technology as the foundation for long-term development, and the technology premium is the most durable and efficient way to make money.
Recently, CATL has launched the third-generation CTP technology, which is called “Kirin Battery” internally. Its system weight, energy density and volumetric energy density continue to lead the industry’s highest level. Under the same chemical system and the same battery pack size, the power of the Kirin battery pack can be increased by 13% compared to the 4680 system.
From a macro perspective, the new energy vehicle industry in which CATL is located is still in a period of rapid development. In 2021, the annual market penetration rate of new energy vehicles will break through the 10% mark for the first time. 10% is recognized as the penetration rate node of emerging industries from the cultivation period to the popularization period. From January to March this year, the sales of new energy passenger vehicles in the narrow sense increased by 146.6% year-on-year, while the total market volume has shrunk.
Not only in the field of automobile batteries, but also in the field of energy storage, the lithium battery of CATL has also opened the floodgates of rapid sales growth. According to ICC Xinyu information data, CATL’s global energy storage battery production market share will top the list in 2021, and its energy storage products are exported to 35 countries and regions around the world.
The Everbright Securities Research Report believes that the demand for lithium batteries in the fields of new energy vehicles and energy storage is strong, Ningde has active production capacity planning, and there is a large space for battery penetration in electric vehicles, energy storage, and other markets. The company’s excellent supply chain management and control capabilities will maintain cost advantages. At the same time, as the energy storage market provides a second growth curve, the company’s overseas business expands rapidly, and the future growth is more certain.
Show long-termism and get a new “stepping stone” for market value growth
Recently, the stock price of CATL has been the most concerned topic in the capital market. On April 20 this year, the market value of CATL fell below 1 trillion yuan. As of the close of trading on April 29, CATL’s stock price rebounded slightly, but the total market value was still below one trillion.
With the ups and downs of the market value of the Ningde era, there have been endless voices from the outside world that are bearish on its development. In the eyes of many people, this first-quarter report of declining profits is a proof of its poor development. But is this really the case?
First of all, we should see that it is not difficult for CATL to make its first-quarter financial report look better. As mentioned above, it only needs to transmit more raw material price increases to downstream OEMs and even consumers. in hand. However, the reason why CATL did not do this is that it sees the fundamental and long-term interests of “good development of the industry”.
For the sake of medium and long-term interests, sacrificing small immediate interests is not difficult to say, but companies still need a lot of courage to do so. Especially for a giant company like CATL with an annual revenue of over 100 billion yuan, even the so-called “small interests” in front of it are likely to be as high as billions of yuan or even tens of billions of yuan in absolute terms.
Second, it stands to reason that when raw material costs are under pressure, companies should find ways to save money by cutting costs on other items, such as R&D. However, what is shown in the first quarterly report is that CATL continues to increase R&D under cost pressure. This is also a kind of “long-termism”, which highlights that CATL is essentially a technology company, not a traditional manufacturing company. , and some investors who see this may adjust their logic of judgment on the value of CATL.
“Long-termism” is not only an important supporting force for the continuous growth of Ningde era’s future performance, but also the core investment logic of the capital market. Therefore, although the profits of the first quarterly report declined, the information released behind it helped Ningde era win more Investors continue to be optimistic. With the help of “long-termism”, it is not a very distant thing for the market value of Ningde era to return to one trillion.Return to Sohu, see more