Where are the profits?

Editor’s note: This article is from the market value list of wechat official account (id:shizhibang2021) and is published by heyueyang, authorized by chuangyebang.

Where are the profits?

The heat of new energy vehicles has not stopped.

In 2021, Tesla sold 930000 electric vehicles, and the new force of car making “Wei Xiaoli” approached the 100000 delivery mark one after another, and the demand for new energy vehicles was released rapidly.

As an upstream enterprise producing power batteries, Ningde times also made a lot of money. In 2021, the annual revenue exceeded 100 billion yuan, reaching 130.356 billion yuan, a year-on-year increase of 159.1%, and the deduction of non net profit was 13.44 billion yuan, a year-on-year increase of more than twice.

Among them, the revenue of power battery in Ningde era is 91.491 billion yuan, and the usage of power battery accounts for 32.6% of the world; In terms of energy storage, the revenue was 13.624 billion yuan, a year-on-year increase of more than 6 times, which has been regarded as a new growth pole.

By the first quarter of 2022, the revenue of Ningde times was 48.678 billion yuan, a year-on-year increase of 153.97%, but the net profit attributable to the parent decreased by 23.62% year-on-year.

Ningde era’s revenue still maintains high-speed growth. Why does the net profit suddenly fall? How do you view this earnings report with upward revenue and downward profit? Is the voice of the industrial chain still there? This article will answer these questions.

To understand why the net profit of Ningde era has changed its face, we need to comprehensively analyze it from multiple dimensions such as income, profit, contract liabilities, gross profit margin and expenses.

First look at income.

The revenue of Ningde times in the first quarter was 48.678 billion yuan, a year-on-year increase of 153.97%. Behind the sharp increase in revenue is the prosperity of the industry, and the shipment volume of Ningde era remains at a high level.

In terms of market share, the global market share of power battery usage has further increased to 35%.

In addition, the contractual liabilities of Ningde era, that is, the amount received in advance from downstream customers, will be converted into revenue in the future. This project increased from RMB 11.54 billion at the end of 2021 to RMB 15.05 billion at the end of the first quarter, an increase of 30% year-on-year. It also shows that there are abundant orders in Ningde era.

Let’s look at the profit level.

The main reason for the decline of net profit in Ningde era is the gross profit margin.

The upstream materials of power batteries include positive materials, negative materials, diaphragms and electrolytes, which are greatly affected by the prices of bulk commodities or chemical raw materials such as lithium, nickel and cobalt.

Raw materials are the most important cost in Ningde era. Taking 2021 as an example, direct materials account for more than 80% of the cost. The rise of upstream prices will suppress the gross profit margin of Ningde era.

Analysts from GF Securities mentioned in the CCTV live broadcast of Finance and economics that the price of lithium carbonate rose from 250000 yuan / ton to 500000 yuan / ton in the first quarter of this year. Nickel prices also rose due to the conflict between Russia and Ukraine.

In the face of such a huge increase, under normal circumstances, midstream enterprises have two choices: raising prices, transferring the cost pressure to the downstream and not raising prices.

The gross profit margin of Ningde era in the first quarter decreased to 14.48% from 26.28% in 2021. It can be seen that Ningde era did not significantly raise prices, but absorbed most of the pressure on the industrial chain.

Ningde era accounts for 35% of the market and 50% of the domestic market. It will not have the ability to transfer costs. However, the power battery is the heart of new energy electric vehicles, and its cost accounts for 30% - 40% of the whole vehicle cost. Once Ningde times chooses to increase the price, it will affect the confidence of the industry and is not conducive to the improvement of the penetration rate of new energy vehicles.

In terms of expenses, the most important expenditure is R & D expenses. For technology-based companies, money in this regard cannot be saved.

The other three period expenses (sales, management and Finance) are less than 6%, lower than the same period in 2021 and the whole year of 2021. The cost control ability of Ningde era is very stable.

Therefore, the quarterly report does not look as good as the annual report. It is the result of the imbalance of upstream resources. The product power and competitiveness of Ningde era have not changed.

Then, the key to the problem is whether the Ningde era will continue to be plagued by this kind of trouble? Are there any countermeasures?

In 2021, the gross profit margin of Ningde era is also declining. The most important reason is that the gross profit margin of power battery decreased from 26.56% to 22%.

We might as well calculate its profitability by the performance of Ningde era in 2021.

Since the second half of last year, lithium carbonate has experienced a round of rise, from about 90000 yuan per ton to about 280000 yuan. According to the calculation of Soochow securities, in the four quarters of 2021, the gross profit margin of Ningde times power battery was 24% / 22.1% / 21.8% / 21.3% respectively, and the gross profit margin decreased slightly in the last three quarters.

Due to a variety of raw materials, which account for different proportions and increases in costs, we can’t calculate how much cost pressure Ningde times hedged by means of long-term agreements and early hoarding.

If we adopt the reverse push method, we will find that in 2021, the cost of indirect materials in operating costs increased by 106%, much lower than the revenue increase of 159.1%.

Combined with the low decline of gross profit margin of power battery, it can be seen that the scale and technical advantages of Ningde era have brought obvious cost reduction effect.

Facing the rising price of upstream resources, Ningde era has four solutions.

First, raising prices is the most immediate way.

Ningde Times announced in late March that it had dynamically adjusted the prices of some battery products due to the sharp rise in the prices of upstream raw materials. In the investor relations activities, Ningde Times said that it had negotiated with customers to jointly deal with the pressure of the supply chain.

Second, it will take some time for the upstream layout to play its role.

In terms of the progress of lithium mine, Ningde times has made a layout since last year. This year, it has obtained the exploration right of Yichun lithium mine. It is inferred that the porcelain ore resource of the mine is about 960 million tons and the associated lithium metal oxide is 265678 tons.

In addition, there are nickel projects in Indonesia and cobalt projects in Congo in Ningde era.

After mastering the initiative of the mine, we can plan the mining progress according to the market price and reduce the upstream cost impact by adjusting the proportion of self supply.

Third, accelerate the layout and recycling.

The recycling of resources is an important link of zero carbon and green carbon economy. Especially for some rare metals, recycling and finding alternatives