CATL into the world's top 500

Just like throwing a handful of salt in a candle, every move of this company can always detonate the entire capital market.

On August 24, CATL released its first half results. In the first half of 2022, the company achieved an operating income of 112.971 billion yuan, a year-on-year increase of 156.32%, and the net profit attributable to the parent was 8.168 billion yuan, a year-on-year increase of 82.17%.

It is worth noting that the entry threshold for the Fortune Global 500 in 2022 is US$28.6 billion, which means that even if the annual increase in entry threshold is taken into account, as long as the Ningde era maintains its current profitability, Into the ranks of the world's top 500. What's more, the second half of the year is the peak season for production and sales. The Ningde era board secretary also made it clear on the conference call that the third quarter will not be worse than the second quarter.

【Cost dredging, profit soaring】

The fact that CATL can have such a high growth rate in the first half of the year is probably something that most investors did not expect.

Since last year, the price of upstream lithium battery materials has continued to skyrocket, and the huge cost pressure has been stagnated after being transmitted to the power battery link, resulting in a hit to the profitability of related companies. Companies with weak cost control have been losing money since the third quarter of last year, and companies with strong cost control, such as CATL, have also been affected to some extent.

In the first quarter of this year, CATL’s net profit fell by 23.62% year-on-year. Combined with the 82.17% increase in the company's net profit in the first half of the year, the recovery of the Ningde era in the second quarter was very strong. In 2022Q2, the company's gross profit margin returned to 20%+, which basically completely got rid of the troubles and shackles caused by upstream price increases.

Analyzing the reasons, there are roughly two points.

First of all, as OEMs have successively raised prices after March this year, the cost of the industry chain has been transferred to the terminal, and the overall profitability of battery companies has been liberated.

Second, the integrated advantages of the CATL era began to emerge.

In contrast, although many friends and businessmen also experienced a marginal improvement in profitability in the second quarter of this year, the rebound was far less than that of the Ningde era. The reason is that the entire industry chain layout of the CATL allows the company to control costs from the source, which is currently difficult for many peers to achieve.

Years ago, CATL began to plan an integrated layout, and carried out the layout of the entire industry chain through different methods such as shareholding, holding, joint venture, and acquisition, and a large part of it was invested in upstream resources such as lithium, cobalt, and nickel.

In the first half of the year, the company accelerated its actions. First, it invested nearly US$6 billion in Indonesia to cooperate with Indonesian state-owned enterprises to develop nickel mines and build lithium battery industry projects, and then won the largest lithium mine in Yichun, Jiangxi, the "Asian Lithium Capital" .

In addition, Ningde Times has also launched the power exchange service brand EVOGO through its subsidiary, Times Electric Service. At present, the first batch of power exchange stations have been launched in Xiamen and Hefei. So far, CATL has opened up the full life cycle value chain of battery research and development, use and recycling.

What is certain is that with the deepening of integration and the scale effect, the cost advantage of CATL will be further enlarged in the future. Investors may wish to keep track of this.

Many people may also worry that the price of upstream raw materials will continue to rise, which will impact the entire electric vehicle industry chain. However, from the perspective of the scarcity of lithium battery materials, it is not only difficult for the price to rise, even the current price is difficult to get long-term support.

Taking the most widely used lithium as an example, the proven lithium resource reserves can produce 160TWh of lithium batteries, while the total installed capacity of power batteries in the world last year was only 300GWh.

Therefore, judging from all the above information, the cost issue that the market worried about in the first half of the year has basically become a thing of the past, especially for a company like the Ningde era, which is a leader in the industry chain.

So what are the future prospects?

【Endogenous extension, ready to go】

Since 2022, CATL has carried out a comprehensive and systematic development and layout around the goal of becoming bigger and stronger.

On June 23, CATL officially released the CTP3.0 battery , namely "Kirin battery", on its official Weibo account, which once again opened the upper limit of power batteries .

Battery life , the "Kirin battery" has high energy density, the energy density of the lithium iron phosphate system can reach 160wh/kg, and the ternary high nickel can reach 250wh/kg, which is 13% more power than the "4680 battery", and the cruising range can reach 1000km . . In terms of energy replenishment, the "Kirin battery" can meet high-voltage fast charging, and can achieve hot start in 5 minutes and 80% charging in 10 minutes , which greatly relieves consumers' "energy replenishment anxiety".

The advent of "Kirin Battery" marks that CATL has once again declared its sovereignty in the field of high-end batteries, and the company has thus formed a complete product matrix with tiered distribution.

Kirin batteries seize the commanding heights of the industry, consolidating performance advantages and technical strength; AB-type solutions focus on the mid-end field, providing customers with more cost-effective products; low-priced sodium-ion batteries are aimed at cost- effective fields such as energy storage , and are expected to be mass-produced next year.

In this way, CATL has occupied various price bands and segments, providing a foundation for maximizing market share.

At the same time, the company has also taken a big step in market development, with overseas layouts in many cities.

On July 21, CATL and Ford finalized a strategic cooperation. CATL will supply lithium iron phosphate battery packs for Mach-E from 2023, and lithium iron phosphate battery packs for pure electric pickup F-150 from 2024  HYPERLINK.

According to Ford's plan, the production capacity of pure electric vehicles will reach 600,000 units by 2023 and 2 million units by 2026, of which Mach-E and F150 are the company's main models (it is estimated that the Mach-E will reach 270,000 units in 2023, and the F-150 will reach 270,000 units in 2023. 150,000 vehicles).

In other words, CATL has entered Ford's core supply chain. The forecast given by the agency is that cutting into Ford is expected to promote the company's 20% share of the North American market in 2025.

On the other hand, the door to the European market has once again opened.

On August 12, the board of directors of CATL passed the Hungarian investment project proposal. The company will invest in the construction of a 100GWh battery capacity in Hungary, with a total investment of no more than 7.34 billion euros. The purpose of this move is to respond faster and better to the needs of Mercedes-Benz, BMW, Stellantis, Volkswagen and other customers.

Prior to this, the battery suppliers in the European market were mainly LG and SK. Last year, the market share of CATL in the region was about 15%. According to the calculation of Soochow Securities, with the release of production capacity in Hungary, CATL's market share in Europe is expected to increase to 30%.

According to data from SNE Research, in the first half of this year, the global market share of CATL reached 34.8%, an increase of 6.2 percentage points compared with the same period last year. Based on the current situation alone, this is probably still not the upper limit.

In the past two years, second-tier battery manufacturers have expanded their production madly, which once gave people the impression of David challenging the giants. But objective reality shows that giants are giants after all. Whether it is technical reserves, product layout, or market development, the CATL era has a significant competitive advantage, and this advantage will be further developed this year.

After the financial report was released last night, it should have been an absolute positive, but today's share price of CATL has fallen uncharacteristically. Investors should rationally realize that the decline is first and foremost caused by the overall environment of the broader market, and almost all listed companies have been affected, not only for the CATL era.

Furthermore, most of the short-term small funds that have been lightened up today are intended to be sold on the basis of good news. The characteristics of these funds are that they run fast and enter fast. As long as the Ningde era continues to improve, it is likely to enter the market. In the final analysis, it does not have the property of weather vane.

On the contrary, large funds are the beacon of market trends, and these funds are still locked up, which is better than walking in the courtyard. The deep meaning behind this is self-evident.

Don’t forget that CATL has just added 45 billion yuan. On the basis of its existing advantages, it has an additional set of cards to play. It can continue to smash technology, market, and production capacity to consolidate its long-term competitiveness.