Has CATL's soaring share price signaled a turning point for the lithium battery industry? | Zhike
Author | Ding Mao
Editor | Zheng Huaizhou
Recently, CATL, which has experienced a nearly 4-month correction, has finally witnessed a sustained rally.
Since September 23, driven by the optimistic sentiment in the A-share market, CATL has entered a soaring mode. The company's share price has soared from around 185 yuan per share to a maximum of 301 yuan per share, hitting a new high in nearly two years, with a cumulative maximum increase of nearly 50%, and its market value has once again exceeded the trillion-yuan threshold to reach 1.3 trillion yuan. Even after yesterday's significant correction, as of now, CATL's share price increase is still close to 40%.
Driven by the booming market, the lithium battery sector has also witnessed a long-awaited carnival. However, looking at the entire 2024, problems such as overcapacity, declining demand, and the continuous decline in the price of key lithium resources are still the main disturbances that plague the future fundamentals of the lithium battery sector. And the current warming of confidence in the A-share market, especially the growth sector represented by the ChiNext, seems to be the life-saving straw that pulls lithium battery enterprises such as CATL back to their peak.
However, after the indiscriminate rise driven by emotions and confidence, the market's view on the future A-share market moving from a general bull market to a differentiated one is becoming more and more consistent. This means that the fundamentals and imagination space of the company in the future are still the key considerations that determine the depth and sustainability of its performance in this round.
In this context, from the mid-year report data, has the lithium battery sector represented by CATL also witnessed a fundamental inflection point?
The Contraction Pressure in the Lithium Battery Sector Remains High
We selected 45 listed companies in the lithium battery sector and divided them into 9 sub-sectors (positive electrode, negative electrode, precursor, electrolyte, separator, battery, structural part, copper foil and aluminum foil, auxiliary material) for analysis.
In 2024H1, the sample companies in the lithium battery sector achieved an operating income of 465.35 billion yuan, a year-on-year decrease of 11.5%; the net profit attributable to the parent company was 34.66 billion yuan, a year-on-year decrease of 7.8%; the overall gross profit margin of the sector was 19.1%, a year-on-year increase of 1.9 percentage points; and the net profit margin was 7.4%, a year-on-year increase of 0.3 percentage points.
Figure: Financial Performance of the Lithium Battery Sector in 24H1 Data Source: Wind, Compiled by 36Kr
Viewed quarterly, the industry's operating income in 2024Q1 - Q2 was 216.87 billion yuan and 248.48 billion yuan respectively, with a sequential growth of 14.6%; the net profit attributable to the parent company was 15.45 billion yuan and 19.21 billion yuan respectively, with a sequential growth of 24.3%.
Overall, against the backdrop of the slowdown in terminal demand growth and oversupply, the prices of the entire core industrial chain of power and energy storage batteries plummeted across the board in 2023. According to the data from the 24Tide Industry Research Institute, the price of power batteries dropped by more than 44% in 2023, the square energy storage battery cell (lithium iron phosphate) dropped by more than 54%, the electrolyte dropped by more than 58%, the price of some positive electrode materials dropped by more than 70%, and the price of battery - grade lithium carbonate dropped by more than 80%. After entering 2024, except for the prices of raw materials such as lithium, cobalt, and nickel in the lithium battery industry chain, and the slight increase in the prices of some positive electrode materials, the prices of other links have remained in a downward trend.
In particular, the increased investment of some second - tier manufacturers in the energy storage field has made the industry's trend of exchanging quantity for price more obvious, bringing greater growth pressure to the revenue and net profit attributable to the parent company of related companies, and the industry as a whole still maintained a contracting trend in the first half of the year. However, the industry repair accelerated in Q2, with both revenue and profits recovering. At the same time, under the rapid downward trend of the key lithium resource prices, the cost pressure has eased, the overall profitability of the industry has rebounded, and the performance of the profit end is slightly better than that of the revenue end.
Profits Accumulate to the Battery
From the perspective of each link, the lithium battery sector showed obvious differentiation in the first half of the year. The links such as batteries and structural parts, which are relatively less affected by lithium and large chemical raw materials and have a superior pattern and high barriers, performed better overall and had stronger performance resilience; while the positive electrode and electrolyte were further under pressure.
Figure: Financial Performance of Each Link in the Lithium Battery Data Source: Wind, Compiled by 36Kr
In terms of the revenue end, the revenue of most links remained contracting under the influence of the slowdown in demand and the price war. The revenue growth of copper foil recovered the fastest due to the rise in copper prices in the first half of the year and the low base effect; the structural parts and auxiliary materials also maintained a good performance thanks to the small price decline and the improvement of the concentration of leading enterprises. Specifically, the year - on - year growth rate of the operating income of the battery sector's sub - sectors in 24H1 from high to low is as follows: Copper foil and aluminum foil (20.24%) > Auxiliary material (9.81%) > Structural part (8.77%) > Ternary precursor (6.17%) > Separator (- 6.94%) > Battery (- 8.00%) > Electrolyte (- 18.11%) > Negative electrode (- 23.93%) > Positive electrode (- 42.74%).
In terms of the profit end, affected by the price war, the profits of most links were under pressure due to the expansion of asset impairment losses. Especially for the links with a greater impact on costs such as the positive electrode and electrolyte, the profit pressure is more obvious. However, from the quarterly performance, the impact of lithium carbonate on the ternary positive electrode has weakened, and the bottom characteristics of the processing fee are also more obvious. The competition of lithium iron phosphate is still fierce; the electrolyte, separator and other links still maintain price competition, and the unit profit is still weak; the battery link has the best profit performance, and both the absolute growth rate and the gross profit margin and net profit margin have recovered.
Specifically, the growth rate of the net profit attributable to the parent company of the sub - sectors in 24H1 from high to low is as follows: Auxiliary material (150%) > Structural part (16.23%) > Battery (10%) > Ternary precursor (- 19.86%) > Negative electrode (- 47.92%) > Separator (- 68.14%) > Positive electrode (- 69.68%) > Electrolyte (- 71.56%) > Copper foil and aluminum foil (- 321.89%).
The gross profit margin from high to low is as follows: Battery (23.06%) > Structural part (22.74%) > Separator (21.8%) > Negative electrode (21.12%) > Electrolyte (16.65%) > Ternary precursor (14.65%) > Positive electrode (8.28%) > Auxiliary material (8.17%) > Copper foil and aluminum foil (2.52%). From the perspective of the change in the gross profit margin, the gross profit margin of the auxiliary material, battery, negative electrode and other links increased year - on - year.
The net profit margin attributable to the parent company from high to low is as follows: Structural part (10.89%) > Battery (10.38%) > Separator (8.10%) > Negative electrode (6.76%) > Electrolyte (4.1%) Ternary precursor (2.48%) > Auxiliary material (1.16%) > Positive electrode (0.61%) > Copper foil and aluminum foil (- 4.12%). From the perspective of the change in the net profit margin attributable to the parent company, the net profit margin of the auxiliary material, battery, structural part and other links improved in 24H1.
In the profit distribution of the sector, it shows that the profits are further accumulated to the battery link. In 24H1, the profit proportion of the battery increased to 83%, and the structural parts and auxiliary materials also increased slightly, while the negative electrode, electrolyte and other links showed a significant decline.
High Growth in Shipments Relies on Energy Storage, and the Price War Continues
As mentioned above, the battery link is the most stable link in the lithium battery sector in terms of profit performance. Then, in the first half of the year, what is the basis for the high profit growth of the battery link? How is the internal competition pattern?
From the demand side, from January to August, the sales volume of electric vehicles in China was 7.037 million units, with a year - on - year growth of 30.9%. Among them, the domestic sales volume was 6.219 million units, with a year - on - year growth of 33.8%, and the cumulative electrification rate was 41.5%. It exceeded 50% for two consecutive months in July and August; the export volume was 818,000 units, with a year - on - year growth of 12.6%. At the same time, according to incomplete statistics from CNESA, in 2024H1, the new energy storage in China added 13.67GW / 33.41GWh of new installed capacity, and both the power scale and energy scale increased by 71% year - on - year.
From January to August, the cumulative sales volume of batteries in China was 581.8GWh, with a year - on - year growth of 42.1%. Among them, the cumulative growth rate of power batteries was 25.5%, and that of other batteries was 157.2%.
Figure: Sales Volume of Lithium Batteries Data Source: China Automotive Battery Industry Innovation Alliance, Compiled by 36Kr
Overall, the high growth in battery shipments during the year is mainly driven by the strong demand for energy storage and consumer batteries, while the growth in power battery shipments is still weaker than the downstream vehicle demand growth. On the one hand, it is because enterprises are still relatively conservative in their actions under the reshaping of the supply - demand relationship. On the other hand, it is because the rapid increase in plug - in hybrids during the year has weakened the real demand for power batteries to a certain extent.
In terms of price, the battery cell prices of power and energy storage continued to decline in the first half of this year. It is understood that as of June, the price of the soft - pack ternary power battery cell dropped from 1.15 yuan / Wh at the end of 2022 to 0.47 yuan / Wh; the price of the square ternary power battery cell dropped from 1.1 yuan / Wh at the end of 2022 to 0.4 yuan / Wh; and as of the end of August, the average price of the 280Ah energy storage battery cell was 0.33 yuan / Wh, with a month - on - month decline of 4.4%, and the average price of the 314Ah energy storage battery cell was 0.34 yuan / Wh, with a month - on - month decline of 2.9%. Currently, the winning bid price of the energy storage battery cell is almost the same as the cost.
Figure: Price Performance of Lithium Batteries Data Source: Dongwu Securities, Compiled by 36Kr
Under the background of the continuous decline in prices and the change in demand structure, the battery link in 24H1 showed several very significant characteristics:
(1) Under the price war, the leading advantage is significant, and the market share is further improved. From January to August, CATL's installed capacity was 133.7GWh, accounting for 46.2%, with a year - on - year increase of 2.89 percentage points. While BYD and the second and third - tier companies such as Eve Energy, CALB, and Guoxuan High - Tech all showed a slight decline.
Figure: Installation Volume of Lithium Battery Enterprises in the First Half of the Year Data Source: China Automotive Battery Industry Innovation Alliance, Compiled by 36Kr
(2) The trend of increasing profits but not revenues in the industry is significant. In 24H1, the overall operating income of the battery was 286.6 billion yuan, a year - on - year decrease of 8%, but the net profit attributable to the parent company in the same period was 27.8 billion yuan, a year - on - year increase of 10%. The gross profit margin of the sector was 22.3%, a year - on - year increase of 3.1 percentage points, and the net profit margin attributable to the parent company was 9.7%, a year - on - year increase of 1.5 percentage points.
(3) The internal differentiation of enterprises is intensified, the leading enterprises have stable profits, and the second and third - tier manufacturers are under pressure. From the revenue end, the income of consumer batteries in 24H1 increased more significantly year - on - year, while most of the power and energy storage batteries remained downward; from the profit end, the leading enterprise CATL has stable profits, with a profit growth rate of 10% in H1, corresponding to a profit of around 0.1 yuan per Wh, with a significant gap from the second - tier enterprises.
