SHANSHAN shares: Lithium battery technology is good enough to win a SINO-US trade war

It was unexpected that the American trade war would develop to such a serious extent.

First, on March 22, President Trump signed a memorandum of understanding, plans a 25% tariff on imports about $50 billion in China. Followed by April 16, the U.S. department of commerce minister Ross announced that due to the government sanctions ban "violation", ZTE will be banned from the United States to buy parts products on the market, deadline for seven years.

Once this news spreads, the whole communication domain, semiconductor domain is shocked. A share is shaken considerably. Even People's Daily commented that core technologies can't be acquired by begging, nor can they be purchased by money.

In fact, it’s not the first time Americans do, we really have to wake up. Similar situation, as early as 2014, occurred in the auto industry, the tire "double reverse", caused no less disturbance than it does today. On November 24, 2014, the Commerce Department has issued a statement that Chinese tires enjoy unfair government subsidies, countervailing duties on Chinese tires. But, after four years, the whole Chinese automobile industry has been completely different. Today's automobile industry, has become China's rare industry can be used to counter the United States.

You see, the United States soon open trade war, has just announced a 25% tariff on Chinese imports, the reaction quickly, immediately take countermeasures, to impose tariffs on U.S. agricultural products, automobile and other fields, the tax rate shall be 25%.Note that the automobile industry, before a few years or the United States, be it stuck throat, now the Chinese can take to make countermeasures of the auto industry, the bottom spirit, exactly? Because, first, the Sino-us trade friction, has little impact on China's automobile industry, and to the United States, China, the world's best market was lost. Second, in a short span of four years, China's new energy automotive industry has been rapid rise.

We analyzed before, in the entire industry chain is the most important Power battery Areas, China's NINGDE era has become the world's first. At the same time, in the field of the core material of battery, SHANSHAN joint-stock enterprises, has become the first to get rid of the dependence on the United States, Japan. Why the new energy automotive industry, automobile industry of China and the United States was the turning and the position of the pattern of important breakthrough? Because, in China's auto industry, has long been the biggest bottleneck is the engine technology. China in terms of engine manufacturing lags significantly of Germany, Japan, the United States, had been for a long time, it is difficult to achieve breakthrough beyond. As a result, China vigorously develop new energy vehicles of the core business logic, is that the limitation of bypass engine, in the auto industry a once-in-a-century corner overtaking opportunities. Once a breakthrough is made in the field of power batteries and battery materials, the entire industrial landscape will change dramatically.

Read this, you can understand the larger pattern of strategic choice behind the trade war: why China at any cost, the new energy automotive industry sustained huge subsidies. Read this, you can understand this year the government work report: accelerate the construction of manufacturing power, focus on a few industries: integrated circuit (which is the core of the ZTE event, chip industry), the fifth generation of mobile communications, aircraft engine, new energy vehicles and new materials. In the report, extend new energy automobile vehicle purchase tax preferential policies by three years. Read this, and you can see why the first unicorns to be released in the IPO review by the CSRC will come from the mobile and automotive industries: first FOXCONN, then the NINGDE era.

It can be said that in the field of new energy vehicles, as well as the core lithium battery field, China has broken through the market monopoly and technology blockade of the United States and Japan and other countries. The field of lithium batteries, first developed in the United States, grew and commercialized in Japan, and was eventually overtaken by China in just a few years. And then, development exploded across the board.

According to thepaper.cn, on April 17, 2017, Simon, the general manager of benchmark mining intelligence in the UK, said: "we are confident that we will be able to achieve this goal. Morse told the BBC that China's lithium battery industry is becoming the world's largest. China will account for 62 per cent of the world's lithium battery capacity by 2020.

Before, we have the world's first in the field of power battery NINGDE era made two in-depth analysis, today, let us go back to the era of NINGDE upstream step, to study the field of battery materials. In the field of battery materials, scale of comprehensive ranking of the world's first is SHANSHAN co. Today, we would like to it, and to analyze the whole battery material link investment logic, and the characteristics of finance. This is the eighth research report of UJUKU investment research team on the industrial chain of new energy vehicles.

From suit companies to new energy automotive materials, the transition is dangerous, but unexpectedly it made it.

By 1996, SHANSHAN shares become the standardization of the domestic garment industry's first listed joint-stock company, at that time, SHANSHAN suit in our country market share has reached for 37.4%." SHANSHAN brand suit, don't too handsome."This is the first thing, CCTV in the history of clothing advertising, almost people are well known in the early 1990 s.

However, crisis always comes at the peak of the industry. There is a hidden risk in all that glitter. At that time, SHANSHAN suits sold well because of the shortage of commodities at that time. However, after the Asian financial crisis in 1997, the whole garment market gradually changed from seller's market to buyer's market. Although the suit has been the absolute leader on the track, but Yong-gang Zheng think: almost finished. He was very anxious, although 1997 is the year of Chinese clothing industry one of the most popular, but, once the market opening, import brands to enter the domestic market, the circuit will die. At the same time, suit the field, in the field of the textile and garment, also is not very safe circuit. The only can do, only transformation.

In 1999, Yong-gang Zheng encountered a major turning point in life, he ran into a new track, the fledgling industry: lithium battery. Lithium battery, which is a kind of chemical power source, the industry is the earliest lead-acid batteries, industrial use the existing more than 150 years, then is the nickel cadmium battery, commercialized in 1956.By the early 1990 s, nickel metal hydride batteries once boom. Then in 1990, SONY has developed a negative electrode materials for carbon materials Lithium ion batteries, until today, the lithium battery has been explosive growth, become the core component of consumer electronics, new energy vehicles. Yong-gang Zheng facing transformation of two choices: one is the real estate, is a lithium battery. When the real estate is also very hot, become a member of the real estate enterprise also seems to be good. Yong-gang Zheng hesitated for a long time, still think technology is more important, so he chose the lithium battery this bitter business.

In May 1999, SHANSHAN and Anshan thermal energy research institute signed a cooperation agreement. SHANSHAN with capital, Anshan thermal energy research institute to "intermediate phase carbon microsphere" project technology, jointly invested in the establishment of SHANSHAN science and technology. This is our country at that time the only carbon research institute, the "middle" phase carbon microspheres is the national 863 program, 2001 formally put into production. Since then, the project ended the Japanese enterprise monopoly on anode materials for lithium ion batteries. At the time of just coming into the lithium battery industry, according to Yong-gang Zheng later recalled, "11 out of ten people say I'm crazy".

At that time, the lithium battery field is almost a blank in our country, the lithium battery industry monopoly by Japan in the world, and the research is also facing bottlenecks, had dialed 17 million funding is used up, but the result is still not fully meet the subject requirements. Yong-gang Zheng decided to support research, lithium battery materials. In 2001, is the activity of the mobile phone market, and promote the domestic lithium battery industry entered a stage of rapid growth, Japan gradually lost the monopoly position in the lithium battery industry, China's first batch of lithium battery company BYD, Bick, Lishen began to emerge. During that time, the lithium battery industry growth rates as high as 30%.Market development so fast, do or not?

Yong-gang Zheng decides: do! And SHANSHAN to build production lines in Pudong Shanghai, specializing in lithium battery cathode material. Although industry a flourishing, but in fact, when the cathode material is not you want to do, want to do is capable. The layout of this area, a deficit is 8 years. To what extent, according to Yong-gang Zheng: "the loss of a complete mess, the board eight people at that time, seven against it."Is this kind of circumstance, still firmly transformation - because, if not transformation, continue to do business suit, it is difficult to do business. Later, their judgment is verified, now in the clothing on the track of listed companies, such as George white, Dayang creation, Sinoer etc, basically a "shell". Today, George white also as a shell company floating around in the market, and Dayang creation has been Yuantong backdoor, Sinoer is controlled by cedar. Even if die, also get transformation.

Lithium battery technology, basically divided into five pieces: positive pole, negative pole, diaphragm, electrolyte, packaging. SHANSHAN continue to bite a tooth in the track layout, the earliest do anode materials, since 2004 the positive material layout, production of cobalt acid lithium. In 2006, began to layout the electrolyte. In 2007, the lithium battery industry is a major turning point - the APPLE appeared. It began to gradually become the mobile phone industry leader, and introduced a bundle in the industry of business model.

At that time, apple binding a Chinese battery company, called ATL. The company is now the top of the world Soft package lithium-ion batteries Company, we analysis before, it is the age of NINGDE (CATL) founder Yu-Qun zeng's first startup.ATL is SHANSHAN shares of big customer. Rely on binding ATL into apple's supply chain, SHANSHAN of lithium battery business finally break the ice, became profitable.

Since 2014, another gap has emerged in the field of lithium battery -- the core component of new energy vehicles: power battery. NINGDE era of rapid rise in the industrial chain, until now already overtaken Japan Panasonic(Tesla suppliers), become the world's first power battery enterprises, While SHANSHAN choose the binding CATL with anode materials. Binding downstream of the strategy, and finally make it from a suit of traditional enterprise, become a big player of the new energy automobile Tuyere. By 2017, based making suit of SHANSHAN, incredibly have evolved to become a global leader in the field of battery materials., according to the large securities research report ranked the world's first in the business of the anode and cathode materials, ranking the first electrolyte business domestic top five.

Five large battery materials, which occupies three

SHANSHAN stake in the business, including lithium battery materials, clothing, and related investment of new energy automotive industry chain layout, such as charging pile, distributed photovoltaic battery PACK, etc.

From 2015 to 2017, SHANSHAN 43 shares income.0.2 billion, 54.In 7.5 billion, 82.7.1 billion; Female net 6.6.5 billion, 3.300 million, 8.9.6 billion; Operating cash flow was 2.5.8 billion, - 5.7.8 billion, - 3.8.1 billion; Gross margin was 23.87%, 21.66%, 25.39%.

Its business, one of the biggest sections for the lithium battery materials business, in 2017 accounted for 72 of income. And 98% of gross profit of 71.28%.

A few part of the lithium battery materials - cathode materials, anode materials, membrane, electrolyte and packaging. Its craft is roughly ratio, 2 for the positive + 1 negative + 0.Nine of the electrolyte. Upstream of battery materials for all kinds of metal resources, such as lithium, cobalt, nickel, downstream for consumer electronics, new energy vehicles two fields.

In the field of materials, SHANSHAN shares occupy three major parts: the positive and negative, electrolyte.

In 2017, the positive electrode material accounted for more than 70.The world's first 56%, production and marketing scale; Anode materials accounted for more than 24.55%, production and marketing scale domestic first; The electrolyte accounted for more than 4.87%, the home also can be in the top five. In the field of battery materials comprehensive scale, ranking the world's first.

In fact, in the field of battery materials, early once is monopolized by the Japanese. Around 2010, China completed the core localization of all raw materials, such as cathode materials, anode materials, electrolytes, copper foil, diaphragm and so on, some end products is basically completed the localization in China. Relies on imports of original material, the United States, Japan, China now has all the mass production. At first, 80% of China's products were imitated and 20% were innovated. Starting from 2012, 80% were innovated and 20% were imitated. Now the proportion of independent innovation is increasing rapidly. In the early days, China, South Korea and Japan were three big powers. Now Japan's share has become more and more low, China's share of nearly 60%.Today, China is both a lithium-ion batteries all over the world's largest consumer market, and is the most concentrated lithium-ion battery industry chain, the largest output market.

Battery material industrial chain split, scale and cost is the core moat

To study SHANSHAN clearly, we must focus on a broader range of battery materials to see the industrial chain. This field can be divided into four rings: the first is resources, the second is a compound, such as cobalt salts; the third is the precursor; the fourth is the material. The price of these four rings is affected by the price of resources and fluctuates almost synchronously. However, notice that the gross profit rate of different companies in each circuit varies greatly.

The anode material, SHANSHAN co, 2017 of the anode materials business gross margin is 24.8% of existing capacity. 4.30000 tons; When the rise of science and technology, 2017, the anode materials business gross margin is 18.55%, existing capacity.60000 tons; Xiamen tungsten industry in 2017, the anode materials business gross margin was 13.9%, existing capacity.70000 tons;

Anode materials - Betty, anode materials in the first half of 2017 business gross margin of 35.04%, capacity of about 60000 tons. SHANSHAN anode materials business gross margin was 27 2017.19%, the production capacity of 60000 tons, the electrolyte - material, electrolyte business gross margin for 45 during the first half of 2017.53%, 2017 annual production capacity of about 40000 tons. New Zhou bang, 2017 electrolyte business gross margin of 32. 48%, 2017 production capacity is about 3.6 billion tons. SHANSHAN co., LTD., 2017 gross margin of electrolyte business 14. 69%, 2016 annual production capacity is about 30000 tons.

Battery material field, the product quality and cost, need to focus on. Stability of product quality and reduce costs, is the goal of the whole industry chain, in this area, one of the production index called first pass yield, that is: the product can be delivered. If a product is made of weak quality and cannot be delivered for rework, the cost doubles.

What is the first pass yield guaranteed by? That’s People, equipment, environment, raw materials, evaluation and analysis. The requirement of current battery production to cleanliness draws close to the requirement of semiconductor production, once dust particle number exceeds bid, can cause the quality problem such as baggy possibly.

In contrast obviously: the battery material on this chain, whose high capacity, good quality, large scale volume, low cost, who can meet the needs of downstream customers, who have higher gross margin could - in this area, the scale is the moat. Back and forth from the aspects of capacity to see this case, the downstream demand is bigger and bigger, SHANSHAN on capacity expansion, money also must be accelerated.

Currently, the Nissan 100 tons of Ningxiang base high nickel production line has been put into production; 622/811 workers at Shizuishan base ternary turn-key project annual output of 7200 tons of common line has been put into production; NINGDE first phase of the project can realize annual production capacity of 20000 tons of finished products, 5000 tons, 5000 tons of new silicon carbide anode materials.

Battery material industry financial password, accounts receivable, inventory

Lithium battery materials of downstream customers directly, is the power battery and cell phone lithium battery enterprise, its final sales terminal customers, is a new energy companies such as apple, SAIC,BAIC, these bosses say is stronger, so will cause some unique financial characteristics of battery materials enterprises. Two groups of data directly, feel the:

1) Accounts receivable

From 2014 to 2016, the accounts receivable of SHANSHAN shares to 12.7.5 billion, 16.1.9 billion, 18.0.7 billion; The proportion of income is 34.83%, 37.64%, 33.01%;Ages within a year of accounts than for 80.26%, 80.11%, 84.6%.

From 2014 to 2016, blessed materials of accounts receivable to 1.8.5 billion, 2.6.6 billion, 4.4.3 billion; The proportion of income of 26.17%, 28.16%, 24.11%; Ages within a year of accounts than for 97.71%, 94.04%, 94.75%.

From 2014 to 2016, the new main states of accounts receivable to 2.2.2 billion, 3.0.9 billion, 4.8.6 billion; The proportion of income to 29.3%, 33.05%, 30.56%;Ages within a year of accounts than for 93.25%, 96.96%, 99.22%.

From 2014 to 2016, when science and technology of the accounts receivable to 2.0.9 billion, 3.2.2 billion, 5.1.2 billion; The proportion of income for 33.55%, 37.43%, 38.37%;Ages within a year of accounts than for 96.36%, 92.01%, 94.67%.

2) Downstream power battery manufacturers of accounts payable:

In the age of 2014 to 2016, NINGDE accounts payable to 3.8.5 billion, 14.7.2 billion, 31.7.3 billion; Accounts for the proportion of operating cost of 59.78%, 42.07%, 37.88%.

From 2014 to 2016, the porch high-tech accounts payable to 3.4.6 billion, 9.2.3 billion, 17.100 million, accounts for the proportion of operating cost for 70.47%, 61.57%, 67.72%.

From 2014 to 2016, Walter's accounts payable is 4.9.3 billion, 15.200 million, 50.200 million; Accounted for the proportion of operating cost for 185.34%, 110.87%, 202.75%.

Note that China's three major power battery manufacturers from the accounts payable are more, NINGDE era is a relatively small proportion of the upstream accounts.

3) Inventory and delivery of goods

From the perspective of goods delivered in a detail in inventory, this subject represents the right of speech of enterprises to downstream customers: products are delivered, but the risk reward is still not transferred, and the loss due to falling price is still borne by the enterprise itself, so the income cannot be confirmed. SHANSHAN co., ltd. has the largest volume in the same industry, but it also sends out a small number of commodities. From 2014 to 2016, the phased collection and delivery commodities of lithium battery materials business are 315040000, 6351020000, 5459160000.New main bond state has delivered commodities, which are 2371980000, 3681960000 and 6317550000 from 2014 to 2016. The same industry when the rise of technology, divine materials without a commodity.

Although at present, the scale of SHANSHAN co., ltd. is the first in the battery material field, and it has become the first in the positive pole world, the first in the negative pole country, and the top five in the electrolyte country. However, in fact, it still needs to continue to develop. From the perspective of battery material company, there are no more than three ways to enhance the power of discourse:

1) Layout, downstream or deepen customer binding;

2) Upstream layout;

3) Industry chain layout area, looking for a new critical point.

The road, we turn to see.

VS downstream VS new circuit

SHANSHAN stock battery material can do big business, to a great extent originates from and downstream ATL binding of this kind of big clients, NINGDE era. Because this kind of customers in the future the capacity expansion of almost no suspense, then as a supplier, as long as the capacity to keep up with SHANSHAN, the expansion of future performance can also see, however, it is not enough.

Lithium battery materials of final sales customers for apple, SAIC, Beijing auto companies such as new energy, the companies say, they will be upstream extrusion parts makers such as CATL, ATL profits. As the parts maker, dissolve the pressure there are two ways:

1) Joint venture with downstream vehicle manufacturers;

2) Upstream of the core material, resource layout.

We have detailed analysis before, the industry's top three NINGDE era(CATL), Panasonic, BYD, choose the former, binding downstream vehicle factory, and now far behind the GuoXuan high-tech, J&R Optimum Energy is the latter, layout of the upstream battery material.

As battery materials enterprise, choose the binding downstream NINGDE era, is a good choice. And, since 2015, SHANSHAN began the downstream industry chain extension, from the power battery PACK, energy storage, new energy vehicles in operation. Downstream of the binding is not enough, at the same time, in order to expand profit, must also continue to increase layout: core resources to expand upwards.

The lithium battery market is very big, is also very competitive. Battery materials enterprises to realize the maximization of the value must be on the industrial layout. Is upstream of the anode materials for lithium carbonate, for example, upstream of the electrolyte is six lithium fluoride phosphate, SHANSHAN in six fluoride phosphate lithium carbonate, lithium has layout, so can control the risk of raw materials.

On July 13, 2017, SHANSHAN co cost 1.8 billion, participate in Luoyang molybdenum increases, in 3.The price of 82 Yuan/shares for 4.700 million shares in Luoyang molybdenum, of its total equity ratio of 2.18%.Luoyang molybdenum industry, it is the largest supplier of cobalt resource in our country, SHANSHAN shares to participate in the decide, it is Luoyang molybdenum is used to repay the purchase of copper and cobalt borrowing, due to the soaring price of cobalt, the Luoyang molybdenum price increase's share price has more than doubled. This fixed increase can be seen as part of the upstream layout of SHANSHAN.

On the new energy automotive industry chain, and what may be the layout of the points?

After I read this, let's look at another path: looking for a new point on the industrial chain. According to statistics from the China association of automobile manufacturers, China's new energy vehicles will be produced 7940000 in 2017, up 53.8% year on year. Sales reached 7770,000 units, up 53.3% percent year-on-year.

The growth of the entire new energy vehicle industry will be more certain in the next five years or more (despite disturbances such as subsidies). The track selection is important. As long as we can keep developing in this industrial chain in the future, we can find new outlets and make money one day.

SHANSHAN in related areas of new energy automotive industry chain, mainly the five circuit layout, divided into two major parts. The first section, including the LIC module, charging pile, battery PACK, share the car business, revenue in 2017 5.4.5 billion, gross margin is 7.17%, compared with 476 revenue.64%, respectively, this business very quickly. Lithium battery capacity (LIC) module, which is a new type of energy storage device, compared to common batteries, fast charging and discharging, long service life, charging time is short, tolerance, high and low temperature difference in transportation,special, energy, and other fields have broad application prospects.

Energy storage areas, is the key layout area. This circuit, it is a broad market more than electric cars, but the market there is a problem: the economy has yet to reach a turning point. If you can combined electric vehicle and energy storage market, can be beyond the inflection point on both sides. How to combine these two markets will be a topic worthy of study in product research and development and policy.

This project, conducted by the Shanghai exhibition owl, SHANSHAN holdings of 98 shares.8%, has the national first semi-automatic LIC module production line, annual production capacity of about 190000.Li-ion battery PACK (battery) –The lithium ion battery Pack market is expected to grow from $2.5 billion in 2011 to $14 billion in 2020, a compound growth rate of 22%, according to the forward-looking database.

By a subsidiary of Ningbo can levy, SHANSHAN holdings of 98 shares.42%, technical route, including cylindrical and square two batteries, the customer as the new dragon horse, Jiangling group, 2017 sales of about 2017 sets.

Charging pile --

In 2017, it will operate in 33 cities nationwide and establish urban quick charging stations.

Car share --

"JIABEI" platform, in Guangzhou, Shenzhen, Shanghai, Changsha and seven cities, bicycles average occupancy rate of 25%, ranking the first in south China Guangzhou market, in 2017 to enter the Pre - A round of funding.

The second sector, mainly for the distributed photovoltaic power station and storage business, revenue in 2017 8.4.9 billion, gross margin is 15.Grew 89%, revenue of 38.73%.

Distributed photovoltaic --

Shall be conducted by the subsidiary eureka, SHANSHAN holdings of 90 shares.150 04%, the total development of 150 mw, the total development.48 mw, mainly distributed in Zhejiang province, 2017 revenue.7.1 billion, net profit 5710.280000.

Note that these five areas are relatively new tracks with growth prospects, but there are no super giants or monopolies yet. For SHANSHAN shares, the future growth point is likely to be hidden in these 5 insignificant businesses. Among them, what needs to be focused on is the distributed photovoltaic business, which has a large revenue volume of nearly 1 billion Yuan.

About this business, it is necessary to say a few words - distributed photovoltaic, is the key to China's new energy structure adjustment and less occupation of land resources and transmission of low cost, can derive photovoltaic applications such as poverty alleviation, agricultural light complementary pattern, the industry growth is very fast. In 2017, solar power generation increased by 57 percent year on year. 1%, the proportion of photovoltaic power generation in total power generation was 1 in 2016. 1% goes up to 1. 8%. Photovoltaic power generation of distributed photovoltaic (PV), is the main growth point in 2017, 2017 new distributed photovoltaic power 19.44 million KW, installed base year-on-year growth of 3 last year seven times.

At present, the photovoltaic power structure, distributed photovoltaic installations accounted for about 15%, well below the 30% to 40% on international level. Therefore, the growth of distributed photovoltaic industry can be expected in the next few years.

This case, SHANSHAN shares distributed photovoltaic business, also has a unique technology, domestic IC industrial waste processing into the solar cell silicon wafers. Note that the cost of waste silicon wafer is about 25-30% lower than that of solar single-crystal silicon wafer, so it has a certain cost advantage. To sum up, the research logic of this research report is as follows:

1) long-term growth uncertainty is high, the new energy automotive industry before, we have studied the whole car, interior, lithium, cobalt, power battery, and other fields, today is the study of the field of battery materials. In this circuit, is a production capacity and scale, whose capacity is high, the scale is big, can get more cost advantage. At present, in the field of battery materials, the largest production capacity is SHANSHAN shares.

2) battery materials this track, downstream face is downstream of battery plant and terminal application vendors, these players in the field of power is strong, so the company in the field of battery materials, must, upstream and downstream binding layout, the layout of the new track and seek industry chain breakthrough.

3) at present, SHANSHAN co upstream layout, to participate in China's largest supplier of Luoyang molybdenum cobalt resources increase, for the 2.A 18% stake in (from the perspective of investment gains double); At the same time, are also trying to open up new track, lithium battery capacitor module, li-ion battery PACK, sharing cars, charging pile and distributed photovoltaic (PV), etc. The drivers of its future revenues are likely to be on these tracks and will require close attention to the market landscape in these areas.

4) According to convention hint valuation circumstance, the price earnings ratio of current dynamics of SHANSHAN is 22 times, the average price earnings ratio of new material of place plate metal is 35. 58. The highest market value of the industry is HUAYOU cobalt industry, with a dynamic P/E ratio of 40. 07. Seeing a few companies in the same industry, when rise technology dynamic PE is 46 times, TIANCI material 40 times, new Zhou bang 37 times.

The page contains the contents of the machine translation.