Victory Precision's 17-year lithium battery diaphragm business loss

On March 13, Victory Precision released its 2017 annual report. The company achieved a total operating income of 15.913 billion yuan in 2017, a year-on-year increase of 18.08%; net profit of 4.62 yuan, an increase of 7.65%. Among them, lithium battery separator business achieved annual operating income of 474 million yuan, an increase of 76.27%, but the net profit was a loss of 1219.13 yuan.

According to the report, Victory Precision's main business is precision manufacturing, intelligent manufacturing and new energy business. The new energy business includes the production and research and development of lithium battery wet diaphragms, providing customers with wet base film and coating film. The products are used in power batteries of new energy vehicles, and also include the production of smart car core structure modules. It mainly provides structural components for central control display modules for new energy vehicles and high-end automobile brand customers.

In terms of diaphragm business, in 2017, there were 2 new base film production lines and 5 coated film production lines. Now there are 8 wet diaphragm production lines with a base film design capacity of nearly 400 million square meters per year; 13 coated film production lines. The designed production capacity is 120 million square meters per year. In 2017, the diaphragm business achieved operating income of 474 million yuan, a year-on-year increase of 76.27%, but the net profit was -1219.13 yuan, which was lower than the promised performance. The company will pay more attention to the internal control of the subsidiary Suzhou Jieli, focusing on improving the production and sales rate to cope with Increasing competition in the wet diaphragm market.

The smart car manufacturing business mainly serves new energy vehicles and high-end automobile brand customers, providing core structure module manufacturing. At present, the structural components of the central control display module have been recognized by brand customers such as Tesla, Mercedes and Bentley. And orders.

It is understood that Victory Precision announced in September 2015 that it intends to use its own funds to invest no more than 612 million yuan to acquire a 51% stake in Suzhou Jieli. Suzhou Jieli was established on September 4, 2009 with a registered capital of USD 4,900. The main product is a lithium-ion battery separator. The main customers are New Energy (Hong Kong) Technology Co., Ltd.

Victory Precision said at the time that after the completion of the transaction, the company will add lithium battery separator production and sales business and enter the new energy lithium battery industry. At the same time, with the help of Suzhou Jieli's technical advantages and customer resources, we will expand new market areas and obtain investment income.

Due to the optimistic market for lithium battery separators, Victory Precision continued to overweight in the industry in 2016. In October of that year, Victory Precision announced that it had invested 486 million yuan to purchase a 33% stake in Suzhou Jieli. Upon completion of the acquisition, Victory Precision will hold an 84.77% stake in Suzhou Jieli.

2016 "China's lithium battery separator industry market status and development trend" is expected, China's lithium battery separator sales will reach 8.15 billion square meters in 2016, lithium battery separator market size will reach 26.3 billion yuan. The Victory Precision’s 2016 semi-annual report shows that after the acquisition of Suzhou Jieli, the company's diaphragm business revenue in the first half of the year was 117 million yuan, and the gross profit margin was as high as 51.36%.

Victory Precision said that with the rapid development of the lithium battery industry and the huge market space of the new energy industry, the company decided to purchase part of the equity of Suzhou Jieli again.

However, by 2017, the lithium battery separator industry has turned sharply. The diaphragm market continues to expand, which has led to a large amount of capital entering. Many leading companies such as Zhangzhou Pearl, Xingyuan Materials, and Henan Yiteng are gradually adding new capacity, which makes the entire lithium battery separator market overcapacity.

Relevant statistics show that the total capacity of diaphragm design in China at the end of 2016 or early 2017 may exceed 2.5 billion square meters.However, in 2017, the shipment of power lithium batteries is about 43.86 GWh, and the demand for diaphragm in the power lithium battery field will reach 880 million square meters. There is a clear trend towards overcapacity.

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