Deep interpretation of the next outlet: 10 billion power lithium battery recycling

With the first batch of power lithium batteries in service, they will enter the retiring period. In 2018, lithium battery recycling is expected to usher in a small peak. We believe that environmental protection needs, the economics of lithium battery recycling and policy support are the three main driving forces driving the development of lithium battery recycling business: (1) Environmental protection: Waste lithium-ion battery materials may cause heavy metal pollution or organic pollution, and ultimately through the food chain. Entering humans and animals seriously affects environmental quality and human health. (2) Economic aspects: By recycling waste lithium batteries and extracting valuable metals such as nickel, cobalt and lithium for recycling, it is an effective way to avoid the risk of raw material scarcity and price fluctuations, and the economic benefits are remarkable. (3) Clear policy orientation: The policy needs to be gradually completed in the aspects of recycling mode and responsibility division, and the use of cascades, extension of producer responsibility and construction of power battery recycling system will be the focus of future development.

With the strong sales of new energy vehicles, the demand for power lithium batteries has opened up a high growth space. According to our calculations, China's power lithium demand is expected to be 28.21GWh, 36.44GWh, 47.48GWh, 69.82GWh and 100.94GWh in 2016-2020, respectively. The year-on-year growth rates in 2017-2020 are 29.17%, 30.30%, 47.05% and 44.57% respectively. These batteries will be phased out between 2018 and 2025. Based on this, we estimate that the power lithium battery recycling market will usher in the peak for the first time in 2018 and will maintain rapid growth in the next three years, and this conclusion has certain stability. It is optimistic that the global power lithium battery recycling market in 2018-2020 will be 4.14 billion Yuan, 8.209 billion Yuan and 13.102 billion Yuan respectively, with a year-on-year growth rate of 474.11%, 98.29% and 59.61%, and a CAGR of 78% from 2018 to 2020.

Industry absolute leader has not emerged, precision and scale effect cast core competitiveness

We believe that companies with accurate card positions and economies of scale will have core competitiveness in the future. First of all, the current power lithium battery recycling industry is still in the initial stage of development, and the future will certainly develop in the direction of scale and branding. In this process, companies with accurate card positions and clear positioning are often able to take the lead in seizing high-quality resources and stand out in the industry reshuffle. Secondly, battery manufacturers with large scale of operation often have relatively complete sales networks, and the recycling system is relatively sound. The number of recoverable lithium batteries is huge, which forms a positive cycle of business and supports performance. Furthermore, economies of scale can dilute transportation costs, procurement costs and expenses. Finally, the scale effect is conducive to the improvement of research and development capabilities and technology. Therefore, we are optimistic about the precise positioning of the business, the early construction of the recycling system, and the close cooperation with battery manufacturers and automobile manufacturers.

Risk warning: major changes have taken place in the new energy policy, battery plant expansion has not been expected, and macroeconomic fluctuations have occurred.

1. Environmental benefits + economy + policy support, driving the lithium battery recycling business

In recent years, the domestic new energy automobile industry has developed vigorously, which in turn has led to a significant increase in the installed capacity of power lithium batteries. Usually the life of a power lithium battery is 3-5 years. The battery pack of an electric vehicle contains 80-120 single-cell lithium-ion batteries, and each power lithium-ion battery weighs 3-4kg. On average, each new energy vehicle has 100 single-cell lithium-ion batteries, each weighing 3kg. As of 2015, the number of power lithium batteries put into use nationwide will reach 266 million pieces, and the total weight will reach 798,000 tons. Ion batteries will be concentrated in the retirement period in 2018, and the problem of recycling lithium batteries for decommissioning is imminent. At the current time, we believe that the environmental protection needs, the economics of power lithium battery recycling and policy support are the three main driving forces driving the development of lithium battery recycling business.

1.1. Heavy metal pollution is increasingly prominent, seriously affecting environmental quality

First of all, the waste lithium battery recycling body has great environmental benefits. The lithium ion battery is mainly composed of a positive electrode material, a negative electrode material, an electrolyte and a separator. Among them, the positive electrode material has the highest value and is also the focus of recycling. Take ternary lithium battery as an example, the positive electrode material accounts for about 35% of its cost, and the negative electrode material, electrolyte and membrane account for about 5%, 8% and 8% respectively. Waste lithium ion battery materials once in the environment, the anode material of nickel/cobalt, manganese and other metal ions, the cathode carbon dust, the strong alkali and heavy metal ions in the electrolyte are likely to cause pollution of heavy metals or organic matter pollution, and finally through the food chain finally enters the human and animal body, seriously affect the environment quality and human health.

1.2. Recycling of used lithium batteries is significant, and precious metals are the key recycling objects.

The high raw material price of power lithium batteries is an important reason for lithium battery recycling. In recent year, the price of important raw materials for ternary lithium batteries has steadily increased. The average trading price of cobalt in the Yangtze River non-ferrous market in recent trading days is about 560,000 Yuan/ton, a record high; the average price of metallic nickel also shows an upward trend; Iron lithium has also remained at a high level of 164,000 Yuan / ton in the near future. In the future, with the expansion of the new energy passenger vehicle market, the further increase in the coverage of ternary lithium batteries will certainly drive the rapid growth of demand for related metal raw materials. The prices of precious metals such as cobalt and nickel are expected to remain high, and the recycling of used lithium batteries is expected. The benefits are highlighted.

1.3. The policy system is gradually improved, and the future development direction is clear.

Since 2012, the ministries and commissions of the country have gradually standardized and improved the recycling market of used lithium batteries at the policy level from shallow to deep, from weak to strong, and have issued more than ten relevant policies and regulations on lithium battery recycling. Through combing, we found that the current policy orientation is concentrated in the following aspects:

(1) Advocate the use of power battery cascades to improve the utilization level of used lithium batteries. In June 2012, the State Council issued the “Energy Conservation and New Energy Vehicle Development Plan”, officially formulated the power battery recycling management method, and established the power elevator cascade utilization and recycling management system. Since then, the "Guiding Opinions on Accelerating the Promotion and Application of New Energy Vehicles", "Guiding Opinions on Accelerating the Development of Renewable Resources Industry", and "Action Plan for Promoting the Development of Automotive Power Battery Industry" have continued this line. First use the cascade, then disassemble and recycle, in order to give full play to the economic benefits of the waste lithium battery.

(2) Implement the extension system of producer responsibility, and clarify the main responsibility of vehicle manufacturers and battery manufacturers to undertake the recycling and utilization of power batteries. Relevant policies pointed out that it is necessary to strengthen the main responsibility of car enterprises in the production, use, recycling and reuse of power batteries, and pointed out that car companies should establish a new energy vehicle product after-sales service commitment system (including battery recycling), implement new energy vehicle power battery Trace source information management, tracking and recording power battery recycling.

(3) Establish a power battery recycling system, including pilot projects, construction of recycling networks, and informationization supervision. Relevant policies clearly stated: 1 Focus on the development of new energy vehicles such as Beijing-Tianjin-Hebei, Yangtze River Delta and Pearl River Delta, support the establishment of a universal and economical recycling model, and carry out demonstration applications; 2 electric vehicles and power batteries The production enterprise shall be responsible for establishing a recycling network for used batteries, using the after-sales service network to recycle used batteries, collecting and publishing recycling information, ensuring the recycling and safe disposal of used batteries; 3 vehicle enterprises shall implement battery traceability information management, and track and record the recycling of power batteries happening.

(4) The industry norms are constantly improved, and the qualification requirements for enterprises are gradually clear. In May 2017, the National Standardization Administration issued the “Specifications for the Recycling and Utilization of Vehicle Power Batteries”, which is the first national standard for the recycling of power batteries, and has clear requirements for the recovery and dismantling enterprises to have relevant qualifications.

1.4. Cascade utilization + dismantling and recycling: an important way to recycle lithium battery

1.4.1. Ladder utilization: a new way to reduce battery cost, development prospects are worth looking forward to

The use of power lithium battery is the middle link between the recycling of new energy vehicles and power lithium batteries, and its significance lies in the battery life from battery raw materials - battery - battery system - automotive applications - secondary utilization - resource recycling - battery raw materials From the perspective of cycle use, battery cost can be reduced and environmental pollution can be avoided.

In general, when the performance of the power battery drops to 80% of the original performance, the standard of use of the electric vehicle will not be met, but it still has the conditions for continued use in the energy storage system, especially the small-scale distributed energy storage system. For example, the output power of intermittent renewable energy generation such as stabilization, stable wind energy, and solar energy is implemented, peaking and valley filling, reducing the contradiction between supply and demand of power load, and meeting the requirements of two-way interaction of smart grid energy. In addition, decommissioned power lithium batteries can also be used in low-speed electric vehicles, such as electric bicycles, electric motorcycles and so on.

The demand for energy storage batteries of the tower base station is huge, which is in line with the characteristics of large-scale use of the battery by the ladder, and will become the main application field of the battery. According to China Battery Network, on January 4, 2018, China Railway Tower and 16 companies including Changan Automobile, BYD, Yinlong New Energy, Waterma, Guoxuan Hi-Tech and Thornton New Energy signed a new energy vehicle power battery recycling strategic partnership agreement. Since 2015, China Railway Tower has built 57 retired battery ladder utilization test sites in 9 provinces and cities such as Heilongjiang and Tianjin, and has actively and beneficially explored the utilization of waste power battery ladders. The scope of the pilot has been expanded to 12 provinces and cities. More than 3,000 test sites have been built, covering various usage conditions such as backup power, peak-shaving, and micro-grid.

Power battery ladder utilization has many years of demonstration experience in Japan, South Korea and the United States. Japan and South Korea have focused on the research of power battery reuse from the beginning of new energy development. This preliminary research work has provided a good reference for China. In recent years, the Chinese government has intensively introduced relevant policies, actively encouraged the use of lithium batteries, and carried out demonstration projects in Beijing, Qingdao, Henan and other regions. Through the construction, commissioning and operation and maintenance of the demonstration project, it will lay a solid technical foundation for the large-scale implementation of the degraded battery energy storage system.

1.4.2. Dismantling and recycling: mainly based on chemical methods, it takes time for commercialization of physical law

After the pretreatment of the waste lithium ion battery is carried out, disassembled, etc., according to the main key technologies used in the recycling process, the resource treatment process of the waste lithium ion battery can be divided into physical method, chemical method and biological method.

Physical methods include fire method, mechanical crushing flotation method, mechanical grinding method, organic solvent dissolution method, and hydrothermal dissolution precipitation method. The fire method, also known as the dry method, is the most commonly used physical recovery method. It mainly removes the bound organic matter by high temperature incineration to realize the separation between the constituent materials of the lithium battery and at the same time oxidize the metal and its compound in the battery. It is reduced and decomposed, and after it is volatilized in the form of water vapor, it is collected by a condensation method or the like.

Unlike the physical method, the chemical method (also known as the wet method) is a method of using a chemical reagent such as sodium hydroxide, sulfuric acid, nitric acid or hydrogen peroxide to remove cobalt, lithium, aluminum, etc. in the positive electrode of a lithium battery after disassembling the broken lithium ion battery. To purify, separate and purify metal elements such as cobalt and lithium. Since the leaching of metal ions with hydrochloric acid generates harmful chlorine gas in the reaction, the leaching system which is currently used more is a mixed system of sulfuric acid and hydrogen peroxide. For the leachate after acid leaching, purification of metal ions can be achieved by a precipitation method, an extraction method, a salting out method, an electrochemical method, or the like.

The chemical method is relatively mature, and the recovery rate is higher than the physical method, but the metal oxide is generally obtained, and cannot be directly used as the cathode material of the lithium ion battery, and the process of preparing the cathode material by using the recovered metal oxide is complicated and costly.

From the perspective of technical support, battery material manufacturers can use their own understanding of the material synthesis process, and deepen the material recycling technology, the advantages are more obvious. In fact, companies such as GEM, Bangpu, and Yanfeng Lithium have developed their business related to cathode materials. Especially in the context of the general price increase of upstream raw materials, it is of strategic importance to lock in important raw material prices through “recycling + production”, and it is expected that this model will be further promoted in the future.

2. Lithium battery recycling ushered in the peak period, the Nuggets billion blue ocean market

2.1. The sales volume of new energy vehicles has increased rapidly, which has led to a significant increase in the installed capacity of lithium batteries.

The sales volume of domestic new energy vehicles has increased rapidly, driving a significant increase in the shipment of power lithium batteries. According to the data of the China Automobile Association, the sales volume of new energy vehicles in China increased from 0.82 million to 777,000 in 2011-2017, with a CAGR of 114%. This led to a rapid increase in the shipment of power lithium batteries. According to GGII data, the installed capacity of China's power lithium batteries in 2017 was as high as 36.4GWh, an increase of about 29%.

In the future, the new energy automobile industry will gradually shift from a policy-driven to a demand-driven one. On the one hand, the intensified market competition has led to the reduction of sales prices by automakers. On the other hand, automakers will achieve economies of scale to reduce costs through expansion. Under the influence of dual factors, prices of new energy vehicles will continue to decline, and demand will become a main driving force for development.

With the strong sales of new energy vehicles, the demand for power lithium batteries has opened up a high growth space. According to our calculations, China's power lithium demand is expected to be 28.21GWh, 36.44GWh, 47.48GWh, 69.82GWh and 100.94GWh in 2016-2020, respectively. The year-on-year growth rates in 2017-2020 are 29.17%, 30.30%, 47.05% and 44.57 respectively. %. This part of the battery will gradually enter the retiring period from 2018 to 2025. Considering the uneven technical level of the industry in 2015 and before, the performance of the lithium battery produced is poor. We expect this part of the battery to enter the retirement period in advance. In 2018, the power lithium battery recycling will usher in the first peak.

2.2. Power lithium battery recycling is getting better, and the market scale has exceeded 10 billion in 2020.

According to the statistics of high-tech lithium battery and lithium battery data, the installed capacity of China's power lithium battery in 2011-2017 is 0.35GWh, 0.66GWh, 0.79GWh, 3.70GWh, 15.90GWh, 28.21GWh and 36.44GWh, respectively. Based on the comprehensive development characteristics of the industry and the evolution trend of the cathode material technology route, we further make the following assumptions:

(1) Installed capacity of power lithium battery with different positive electrode materials: Considering that lithium iron phosphate battery has an absolute leading position in 2011-2015, it is estimated that its installed capacity accounts for 100%, 95%, 90%, 85 of the total installed capacity of the year. % and 80%, ternary battery installed capacity accounted for 0%, 3%, 7%, 11% and 15%.

(2) Distribution of ternary material types: The ternary materials used in 2011-2015 are all ternary 111. In 2016, the ternary materials used in the ternary materials accounted for 50%, and the ternary materials used in 2017 were 111, 532 and 622. The proportions are 15%, 80% and 5% respectively.

(3) Power battery service period: The service life of power lithium battery is generally 3-5 years. Considering that the industry before 2015 is still in the early stage of development, the quality and performance of power battery is limited. We are optimistic that the service life of power battery is 3 years. According to this, the power lithium recovery scales from 2018 to 2020 were 15.11GWh, 26.79GWh and 34.05GWh, respectively, with year-on-year growth rates of 325.25%, 77.36% and 27.10% respectively.

(4) Estimation of the weight of the positive electrode materials of different types of batteries: Calculate the main raw material weight of the unit KWh power lithium battery by using the energy density, chemical molecular formula and element proportion of various positive electrode materials.

(5) Recycling interest rate: At present, the recycling rate of the leading power lithium battery recycling enterprises in Jintai Pavilion and other industries is about 95%. Considering the gradual climb of recycling rate, we estimate that the recycling rate in 2015-2020 is 85%, 88%, 90%, 95%, 97% and 98%.

(6) Unit price of precious metals: According to the annual average unit price of nickel, cobalt and manganese in the Yangtze River non-ferrous market, the recovery price per ton in 2015-2017 is determined. According to the annual average price of lithium in the non-ferrous metal market in Shanghai, the recovery price per ton of lithium in 2015-2017 is determined. The average price in January 2018 is approximately the average price for 2018. Considering that the current market expectation of cobalt price increase is sufficient, the price of cobalt from 2019-2020 is raised to 600,000 Yuan/ton, and other metals are 2019-2020. The average price is consistent with 2018.

(7) Global power lithium battery recycling market scale: According to the “13th Five-Year National Strategic Emerging Industry Development Plan” issued by the State Council, it is estimated that new energy vehicles will achieve production and sales of more than 2 million vehicles in 2020, while Tianfeng Motor Team The production and sales volume of global new energy vehicles in 2020 is estimated to be about 4 million units. In fact, China's new energy vehicle production and sales have also ranked first in the world for three consecutive years. Based on this, we roughly estimate that the global power lithium battery recycling market is about twice as large as China.

(8) Considering that the assumption that the power battery has been in service for three years is more optimistic, further increase the following scenarios:

Scenario 1: Recycling scale in year N = N-4 year service scale * 50% + N-3 year service scale * 50%

Scenario 2: Recycling scale in year N = N-4 year service scale * 40% + N-3 year service scale * 60%

Scenario 3: Recycling scale in year N = N-4 year service scale * 30% + N-3 year service scale * 70%

Scenario 4: Recycling scale in year N = N-4 year service scale * 20% + N-3 year service scale * 80%

Scenario 5: Recycling scale in year N = N-4 year service scale * 10% + N-3 year service scale * 90%

Based on the above calculations, we believe that the power lithium battery recycling market will usher in the peak for the first time in 2018 and will maintain rapid growth in the next three years, and this conclusion has certain certainty (the market size difference calculated under different scenarios is small). It is optimistic that the global power lithium battery recycling market in 2018-2020 will be 4.14 billion Yuan, 8.209 billion Yuan and 13.102 billion Yuan respectively, with a year-on-year growth rate of 474.11%, 98.29% and 59.61%, and a CAGR of 78% from 2018 to 2020.

2.3. The efficiency of power lithium battery recovery is remarkable, and the performance of ternary battery is particularly prominent.

Considering the increasing installed capacity and proportion of ternary power batteries, we use ternary batteries as an example to analyze the cost and benefits of power lithium recovery:

(1) Recycling cost: The cost of recycling the waste ternary battery mainly comes from the cost of materials such as used batteries, liquid nitrogen, acid and alkali reagents, etc., which accounts for more than 75% of the total cost.

(2) Unit GWh power lithium battery quality: Here, taking Nissan leaf as an example, the power battery cathode material is composed of LMO blend 11% NCA, and the cathode material quality accounts for 38% of the total battery mass. The unit GWh power battery weight can be derived from the specific capacity and voltage of the LMO and NCA.

(3) Recyclable metal quality of GWh LeafEV power battery: Considering the average recovery rate of 95%, calculate the mass of metal, nickel, lithium and cobalt recoverable by GWh power battery according to the metal content of different types of positive electrode materials.

(4) Analysis of cost and benefit of power lithium recovery: According to the average price of January 2018 in the Yangtze River Nonferrous Market and Shanghai Nonferrous Market, the unit price of nickel is 99,000 Yuan/ton, the unit price of cobalt is 573,000 Yuan/ton, and the unit price of manganese is 1.3. The unit price of 10,000 Yuan/ton and lithium is 910,000 Yuan/ton, thus calculating the revenue, cost and gross profit margin of the unit GWh power battery recovery.

The results show that the power lithium battery with LMO and LFP as the positive electrode material does not have the recovery value, and NCM111, 532, 622, 811 and NCA have high recovery value.

2.4. The business model is relatively diverse, the card position accuracy and scale effect cast the core competitiveness

(1) Recycling mode based on manufacturers of power batteries (materials): In this mode, it can be recycled by reverse logistics through the operating service network of electric vehicle manufacturers and battery leasing companies. However, it also faces difficulties such as limited recycling capacity of individual enterprises, small recycling channels, and difficult capital turnover.

(2) Industry Alliance: The industry alliance consists of power battery manufacturers, electric vehicle manufacturers or battery leasing companies in the industry. The recycling process is for the power battery recycling organization to use its member company's sales service network to rebuild into a recycling network. After that, it will be transported back to the professional recycling center for recycling. The main features of this model are strong influence, wide coverage and simple mode, but high requirements for cooperation consistency.

(3) Third-party recycling: Third-party enterprises need to build a recycling network and related logistics system on their own, and be responsible for recycling the used lithium battery generated by the after-sales market, and then recycling it.

Overall, China's power lithium battery recycling industry is still in its infancy, and there is still room for improvement in industry standards, recycling standards and recycling system construction. Drawing on the experience of foreign lithium battery recycling and lead battery recycling, we will judge the future card position and scale effect. It is the main logic of industry competition, for the following reasons:

(1) At present, the power lithium battery recycling industry is still at a stage of low barriers to entry, product differentiation is not obvious, and public brand awareness is poor. In the future, with the expansion of market scale and the improvement of relevant policies and regulations, the lithium battery recycling industry will certainly scale up. The development of branding and the role of brand premium will become increasingly prominent. In this process, companies with accurate card positions, clear positioning, and proper strategy can often take the lead in seizing high-quality resources and stand out in the industry reshuffle.

(2) Battery manufacturers with large business scale often have relatively complete sales networks and large downstream customer groups, which mean that the recycling system is relatively sound, the amount of recoverable lithium batteries is large, and more precious metals can be extracted for anode material reproduction, etc., thus forming a positive cycle of business and supporting performance.

(3) Scale effect can dilute transportation costs, procurement costs and expenses. Due to the special properties of lithium-ion battery flammable and explosive, transportation cost and storage cost will be significantly higher than other enterprises in the recycling process, and the unified treatment of large-scale decommissioned lithium battery can effectively dilute the cost and reduce the cost rate.

(4) The scale effect is conducive to the improvement of research and development capabilities and technology. The current development of power lithium batteries is changing with each passing day. Under the guidance of the goal of longer cruising range and higher energy density, product technology upgrades faster, and only enterprises above the scale can continue to invest in R&D, closely follow and even lead the industry's technological changes. .

Driven by the scale effect, we are optimistic about the early layout recycling system, and the close cooperation with battery manufacturers and car companies, such as Tianqi shares, GEM, Bump and so on.

2.5. The industry's absolute leader has not yet emerged, optimistic about the recycling of the perfect target

We have sorted out and sorted out the relevant targets in the industry. At present, the enterprises that distribute lithium battery recycling include upstream materials companies such as Xiamen Tungsten and Huayou Cobalt, as well as mid-stream battery manufacturing companies such as AVIC Lithium, BYD and CATL, and relatively independent. The three parties recycle the company, and the three parties have their own advantages in business development. At present, the industry's absolute leader has not yet emerged. We are optimistic about the perfect layout of the recycling channels, and it is easy to quickly and quantitatively exert the scale effect.

In the recycling mode dominated by power battery manufacturers, the typical enterprise is the Ningde era (Bangpu). Through several years of rapid development, Bangpu has formed three major industrial sectors: “Battery Circulation, Automobile Circulation and New Materials”, specializing in digital battery and power battery recycling and gradient energy storage; traditional scrap car recycling and dismantling, key zero Remanufacturing of components; and the provision of industrial production and commercial recycling service solutions for high-end battery materials and automotive functional bottleneck materials.

Bangpu uses battery recycling technology to produce lithium battery materials. The main products are ternary precursors. The production process is divided into three stages: waste battery pretreatment process, wet process and precursor synthesis process. Production of lithium-ion battery material ternary precursor (nickel-cobalt-manganese hydroxide), etc., so that nickel-cobalt-manganese lithium resources in the battery industry to achieve recycling. The ternary precursor is the raw material for manufacturing the positive electrode material of the ternary lithium ion battery, and is also one of the key materials for the new energy vehicle power battery.

Ningde era acquired the shares of Bangpu Group, which formed a business cycle of “production-recycling-production” of lithium batteries. On December 12, 2013, Ningde Hesheng signed an agreement with Guangdong Bangpu, stipulating that Ningde and Shengli twice acquired the total of 35% and 35.08% of the shares of Guangdong Bangpu held by Li Changdong, and the total purchase price was RMB 40,134,960, added RMB 68 million to Guangdong Bangpu. After the acquisition of equity in Ningde, the Bangpu Group achieved rapid development. According to the recent financial data of Bangpu Group, Guangdong Bangpu achieved a net profit of RMB 10,357,650 in 2016, and in 2017, it achieved a net profit of RMB 25,575,900 in the first half of the year. The company achieved a leap-forward growth.

At present, Bangpu's independent research and development of power battery modules and single-unit automatic dismantling equipment can realize 30,000 sets of power battery packs per year, and the production capacity is always at the domestic leading level. The company handles more than 20,000 tons of used batteries annually and produces 10,000 tons of nickel-cobalt-manganese hydroxide per year. The total yield exceeds 98.58%. The recycling treatment scale and resource recycling capacity have leapt to the top in Asia. Through the original "reverse product positioning design" technology, Bangpu took the lead in cracking the industry problem of "recycling waste" in the field of waste battery recycling in the world, and successfully developed and mastered the "directional circulation" core technology of waste and raw material docking. The recycling industry is one of the few new materials companies.

The core enterprise recovered by the third party is Tianqi. The company has entered the field of lithium battery recycling, and achieved 51% control of Shenzhen Gantai Energy Recycling Technology Co., Ltd. through “acquisition + capital increase”, and plans to complete the acquisition of batteries through the special M&A fund established by the shareholding (equity ratio of approximately 14.29%). Recycling the leading Jintai Pavilion, to build a whole industry chain of automobile recycling, and has a stable cooperation with domestic car companies for many years, and it is expected to become the core third party of battery recycling in domestic car enterprises in the future.

According to the official website of Gantai Technology, the company now has more than 20 domestic and foreign R&D experts, and has established a world-leading “Research and Development Laboratory for Power Battery Cycle Integrated Application Technology”. The independent innovation capability has been continuously improved, and it has 19 core patents. The company is committed to continuously improve the technology and solutions for power battery from use to waste and harmless recycling, forming a closed loop ecosystem of power battery green industry chain. Through the acquisition of Jintai Pavilion, the company's business layout has been further improved. Gantai Technology is responsible for battery recycling and dismantling. Jintaige is responsible for the recovery of elements, and the synergy effect is remarkable. In the future, automobile production enterprises will bear the responsibility of recycling and utilizing the main battery, while the OEM has no mature recycling system and technology, and will cooperate with third parties in depth. Tianqi is building a full cycle of automobile recycling and industrial chain, and has stable cooperation with domestic car companies for more than 20 years. It is expected to become the core third party for battery recycling in domestic car enterprises in the future.

2.6.1. From foreign experience: business model is dominated by car companies, and echelon utilization is the preferred option

(1) Japanese model: corporate lead establishing a recycling system for decommissioned power lithium batteries

In the Japanese model, the construction of the recycling system is enterprise-led, using the service network of retailers, car dealers or gas stations to recycle used batteries to consumers, and the recycling route is opposite to the sales route. At the same time, the government clarified that the producer is the responsible party for battery recycling and gives certain subsidies to the producers to increase the enthusiasm for recycling.

At present, Japan has established a recycling system for “battery production, sales, recycling, and recycling” in the use of power battery cascades. Japan in the use of power battery cascade set up a "battery production and sales - recycling - regeneration process of recycling system, including Sumitomo 4R energy joint venture, Nissan and SHARP, NEC, many Japanese companies, such as during retirement lithium batteries used to form used in solar power, wind power battery research and development and application of the system.

(2) American model: The market is supplemented by the main law. The multi-party cooperation promotes the development of the recycling management of renewable resources such as used batteries in the United States. The market regulation is the main factor, supplemented by environmental protection standards for management constraints. Non-profit organizations such as the American Portable Rechargeable Battery Association (PRBA) publicize and educate the public to guide the public to actively cooperate with the recycling of used batteries.

(3)German model: laws and policies regulate the market order, and promote the market-oriented construction of the fund recycling system

According to EU and German regulations on battery recycling, in Germany, battery manufacturers and importers must introduce to consumers the places where batteries can be recycled for free, and end users have the obligation to deliver waste batteries to the recycling agencies. In addition, Germany has established a recycling system for portable batteries and lead-acid batteries by using the fund and deposit system, which works well.

Germany's portable recycling system is Europe's largest portable battery recycling organization, and its members mainly include battery manufacturers and distributors. Battery recycling points cover supermarkets, shopping malls, cities and villages. The battery is collected by three safety markers to take different safety strategies during transportation and storage. Among them, green boxes collect ordinary batteries, and yellow boxes collect high-energy batteries (500g or more). Lithium battery), the red box collects damaged high-energy batteries.

2.6.2. From the recovery of lead storage battery: Pay attention to the construction of recycling system, scale effect is an important way to reduce cost.

Lead storage battery is a kind of primary battery that can be charged and discharged cyclically. It has the advantages of high cost performance, superior high and low temperature performance, safe and reliable operation. It plays an important role in the field of energy storage and is widely used in important fields of national economy such as transportation, communication, and electric power. China is the world's largest producer and consumer of lead storage batteries, accounting for more than 40% of the global market. The plastic casing of lead storage batteries, sulfuric acid solution, lead grid and lead paste have recycling value.

From the point of view of the recycling system, despite the large number of discarded lead-acid batteries in China, the waste lead-acid battery recycling industry is still in a disorderly state. At present, there is no national and regional recycling network built by battery manufacturers or recycled lead manufacturers. The rate of regular recycling of used lead-acid batteries is low, and individuals and other channels dominate. Most of the individual channels belong to the three non-legal enterprises, and the waste battery flow to the non-standard regenerative lead enterprises is an important factor leading to lead pollution. According to China Environmental Network, in 2016, the production of waste modest batteries in China was about 350 tons, of which lead and its compounds weighed about 260 tons, which has a high recycling value. Among them, more than 90% of used lead-acid batteries are recycled, but due to the unsound recovery mechanism and the proliferation of self-employed households, hundreds of thousands of tons of lead-containing acid liquids are directly dumped every year.

The policy guides the development of the industry, and many enterprises have arranged lead battery recycling business. In January 2017, the “Implementation Plan for Producer Responsibility Extension System” issued by the General Office of the State Council required producers’ responsibilities to be extended to four aspects: ecological design, use of recycled raw materials, standardized recycling and expansion of information disclosure. Lead storage batteries were listed. Within the scope of the first batch of implementation, units and individuals that collect, store, transport, utilize, and dispose of solid waste must take measures to prevent proliferation, loss prevention, leakage prevention, or other measures to prevent pollution. After the introduction of the policy, many lead storage battery companies such as Chaowei, Tianneng, Camel, and sail have begun to recycle business, and the industry is expected to usher in a new round of growth.

Rethinking the development process of lead battery recycling, there are several points for lithium battery recycling and thinking:

(1) Pay attention to the construction of recycling system. A perfect recycling system is an important way to regulate the industry order and reduce the environmental pollution caused by the process of recycling lead.

(2) Scale effect is an important way to reduce costs. In addition to the lack of policy constraints, the purchase price is also one of the reasons for the disorder of the lead battery market. Due to the simple recycling process of individual operators or illegal enterprises, the capital expenditure is small, and the recovery costs, research and development costs, transportation and storage costs of mature enterprises are relatively high, and the resulting purchase price is not competitive. In this case, achieving scale effect by expanding the recovery volume is an important way to reduce costs and increase efficiency.

(3) Focus on the overall coordination of policies. At present, the relevant policies have made clear requirements for the harmless recycling and disposal of lead storage batteries, but the incentive policies such as supporting tax incentives have not been implemented, and the lead battery recycling qualification certification cycle is long and difficult, and some enterprises have not received enthusiasm. Effectively stimulated, there is still room for improvement in the vitality of the industry.

3. Investment suggestion and profit forecast

3.1. Tianqi shares: vigorously develop circular economy, it is expected to become the core third party of lithium battery recycling in the future 3.1.1. Acquire Gantai technology enter the power battery recycling industry

In December 2017, Tianqi shares and Zhang Shuquan in the Wuxi City of Jiangsu Province, the “Investment Framework Agreement” for Shenzhen Qiantai Energy Recycling Technology Co., Ltd. was signed. The company acquired 51% equity of Qiantai Technology through “acquisition + capital increase”. Qiantai Technology promises to achieve a consolidated net profit of not less than RMB 160 million from 2018 to 2020.

Founded in July 2015, Shenzhen Qiantai Technology is committed to continuously improving the technology and solutions for power battery from use to waste recycling to harmless recycling, forming a closed loop ecosystem of power battery green industry chain, and implementing new Development and industrialization of energy vehicle power battery recycling, resource comprehensive utilization, energy storage and other products. The company has more than 20 domestic and foreign R&D experts, and has established the world's leading “Dynamic Battery Cycle Integrated Application Technology R&D Laboratory”. It has 19 core patents and passed the national high-tech enterprise certification in August 2017.

According to the company's announcement of Qiantai technical audit report, Qiantai Technology realized the operating income of 732,800 Yuan and 121 million respectively in the first three quarters of 2016-2017, achieving a net profit of 9.62 million Yuan and 2.472 million Yuan, gross profit margin. From 8.18% to 13.17%, the net profit margin increased from negative to 2.04%, and the growth rate is very fast. At the same time, the company's performance commitment is 2018-2020 consolidated statement net profit of not less than 160 million Yuan, highlighting the company's prospects for lithium battery recycling industry and the company's future rapid growth, the prospect is worth looking forward to.

3.1.2. Establishing an industrial fund to acquire Jintai Pavilion, lithium battery recycling and another city

On December 25, 2017, Tianqi announced that it intends to sign the "partnership agreement on the merger and investment of Wuxi Tianqi recycling industry" with Wuxi finance holding co., LTD, and jointly invest 700 million Yuan to establish the merger and investment enterprise of Wuxi finance holding Tianqi recycling industry. Tianqi shares participated in the establishment of the partnership with its own capital of 100 million Yuan, accounting for 14.3%. This investment is mainly through the establishment of a special fund for mergers and acquisitions, giving full play to the professional ability and resources of each investor, to complete the acquisition of the target company Jintaige and gaining control of Jintaige.

3.1.3. Qiantai Technology and Jintai Pavilion are expected to achieve a deep fit and give full play to synergies

Qiantai Technology is responsible for battery recycling and dismantling. Jintaige is responsible for the recovery of elements, perfect coordination and remarkable synergy. In the future, automobile production enterprises will bear the responsibility of recycling and utilizing the main battery, while the OEM has no mature recycling system and technology, and will cooperate with third parties in depth. Tianqi is building a full chain of automobile recycling and recycling. According to the company's official website, the company has stable cooperation with well-known car companies such as Audi, BMW, Mercedes-Benz and Ford for more than 20 years. It is expected to become the core third party for battery recycling in domestic enterprises.

3.1.4. Earnings Forecast and Investment Proposal

It is estimated that the net profit of the company will reach 119 million, 350 million and 451 million Yuan respectively in 2017-2019, corresponding to EPS of 0.32 Yuan, 0.94Yuan and 1.22 Yuan respectively. According to the 2018 earnings forecast, the net profit of the automobile business, scrap steel business and photovoltaic business reached 0.8 billion Yuan, 250 million Yuan and 0.2 billion Yuan, respectively, which were valued at 25 times. The listed company had a reasonable market value of 8.75 billion Yuan, according to the total shares of 371 million shares. Calculated, the listed company's share price corresponds to a reasonable valuation of 23.5 Yuan. Maintain a “Buy” rating.

3.2. GEM: Recycling + reengineering + Service to create a new energy life cycle value chain

At present, GEM has built the 16th National Recycling Industrial Park, scrapped the automobile comprehensive utilization industrial chain, five industrial chains such as waste slag, waste sludge and wastewater recycling industrial chain, and processed over 3 million tons of waste annually, recycling cobalt and nickel. 25 kinds of scarce resources such as copper, tungsten, gold, silver, palladium, rhodium, ruthenium and rare earth, as well as ultra-fine powder, power battery materials for new energy vehicles, plastic wood profiles and other high-tech products, forming the most complete in China. It has formed