Shanshan shares: Lithium battery technology can win the Sino-US trade war

　　Note that the automobile industry was still dominated by the United States in the past few years and was stuck in its throat. Now the Chinese can use the automobile industry as a countermeasure. Where is this confidence?

　　I did not expect that the American trade war would develop to such a serious degree.

　　First, on March 22, Trump signed a memorandum, planning to impose 25% tariffs on approximately US$50 billion of Chinese imports. Then on April 16, US Secretary of Commerce Ross announced that ZTE would be prohibited from purchasing parts and components from the US market for a period of up to 7 years due to "violation" of the US government's sanctions.

　　As soon as the news came out, the entire communications and semiconductor fields were shocked, and A shares fluctuated sharply. Even the "People's Daily" issued a sad comment: The core technology can't be obtained by alms, and it can't be bought with money.

　　Actually, it’s not the first time that Americans have done this. Everyone really woke up. A similar scenario occurred in the automobile industry as early as 2014. The tire "dual anti-dumping case" at that time caused no less controversy than today. On November 24, 2014, the U.S. Department of Commerce issued a statement stating that Chinese tires exported to the United States enjoy unfair government subsidies and impose countervailing duties on Chinese tires exported to the United States. However, four years later, the entire Chinese auto industry is completely different. Today's automotive industry has become one of the very few industries in China that can be used to counter the United States.

　　You see, the U.S. has just announced a 25% tariff on Chinese imports shortly after the start of the trade war. China responded quickly and immediately took countermeasures to impose additional tariffs on U.S. agricultural products, automobiles, and other fields. The tariff rate is equal to 25%. %. Note that the automobile industry was still dominated by the United States in the past few years and was stuck in its throat. Now the Chinese can use the automobile industry as a countermeasure. Where is this confidence? The reason is that, first, the Sino-US trade friction has little impact on China's auto industry, but for the United States, it has lost China, the world's best market. Second, in just four years, China's new energy automobile industry has risen rapidly, and it is not what it used to be.

　　We have analyzed before that in the most important power battery field of the entire industry chain, China's CATL has become the world's number one. At the same time, in the core battery material field, Shanshan shares and other companies have also become the first, getting rid of dependence on the United States and Japan. Why is the new energy automobile industry an important breakthrough to reverse the pattern and status of the Chinese and American automobile industries? Because, in the Chinese automobile industry, the biggest bottleneck for a long time is engine technology. In terms of engine manufacturing, China lags behind Germany, Japan, and the United States. Therefore, the core industry logic of China's vigorous development of new energy vehicles is to bypass engine restrictions and realize the once-in-a-century overtaking opportunity in the automotive industry. Once breakthroughs are achieved in the fields of power batteries and battery materials, the entire industrial structure will change drastically.

　　Understanding this, you can understand the strategic choice behind this trade war in a larger pattern: why China continues to provide huge subsidies to the new energy automobile industry at any cost. After reading this, you can understand this year’s "Government Work Report": Accelerate the construction of a manufacturing power and focus on the development of several industries: integrated circuits (that is, the core of this ZTE incident, the chip industry), the fifth generation of mobile communications, and aircraft engines. , New energy vehicles, new materials. In the report, the new energy vehicle purchase tax preferential policy was extended for another three years. After reading this, you can understand why the first batch of unicorns released by the China Securities Regulatory Commission in the IPO will come from the mobile phone and auto industries: first from Foxconn and then from 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 technological blockade of the United States, Japan and other countries, and there is no need to look at the faces of Americans and Japanese. The field of lithium batteries was first born in the United States, and later grew and became commercialized in Japan. Finally, it was overtaken by China in just a few years. Next, it will soon be over.

　　According to The Paper, on April 17, 2017, Simon? In an interview with the BBC, Morse believed that China's lithium battery industry is becoming the world's number one. China's lithium battery production capacity will account for 62% of the world's total in 2020.

　　Before, we did two in-depth analysis on the world's first Ningde era in the field of power batteries. Today, we take a step further upstream in the Ningde era to study the field of battery materials. In the field of battery materials, Shanshan shares the largest overall scale in the world. Today, we will start with it to analyze the investment logic and financial characteristics of the entire battery material link. This is the eighth research report on the new energy automobile industry chain made by the UJU Investment Research Team.

　　From a suit company to a new energy vehicle material, this transition is dangerous, but I didn’t expect it to be made.

　　In 1996, Shanshan became the first standardized joint-stock company listed in the domestic apparel industry. At that time, Shanshan's market share in my country's suit market had reached an unprecedented 37.4%. "Shanshan suits, don't be too chic." This is the first clothing advertisement in CCTV history, almost everyone knows it in the early 1990s.

　　However, crises always come at the highest point in the industry. Under the glamour, there are hidden risks. At that time, Shanshan suits sold well because of the shortage of goods in that era. After the Asian financial crisis in 1997, the entire clothing market gradually changed from a seller's market to a buyer's market, turning into a red sea. Although it is already the absolute leader on the track of suits, Zheng Yonggang believes that it is almost over. He was very anxious: Although 1997 was the hottest year for China's apparel industry, once the market opened up and imported brands entered the domestic market, this track would die. At the same time, the field of suits, in the entire textile and apparel field, is not a very safe track. The only thing that can be done is transformation.

　　In 1999, Zheng Yonggang encountered a major turning point in his life-he came across a new track and a newly emerging industry: lithium batteries. Lithium battery is a kind of chemical power source. Lead-acid battery was first used in this industry. It has been used industrially for more than 150 years. Later, it was nickel-cadmium battery, which was commercialized in 1956. By the early 1990s, nickel-metal hydride batteries had sprung up. Then in 1990, Sony developed a lithium-ion battery using carbon-based materials as the negative electrode material. To this day, lithium batteries have exploded and become the core component of consumer electronics and new energy vehicles. At that time, Zheng Yonggang faced two transformation options: one was real estate and the other was lithium batteries. At that time, real estate was also very hot, and it seemed not bad to be a member of the real estate company. Zheng Yonggang hesitated for a long time, but still felt that technology is more important, so he bit the bullet and chose the bitter business of lithium batteries.

　　In May 1999, Shanshan signed a cooperation agreement with Anshan Thermal Energy Research Institute. Shanshan jointly invested in the establishment of Shanshan Technology with capital and Anshan Thermal Energy Research Institute with the "Mesophase Carbon Microsphere" project technology. This was the only carbon research institute in my country at that time. Its "mesocarbon microspheres" was a national 863 project, which was officially put into operation in 2001. Since then, this project ended the monopoly of Japanese companies on lithium-ion battery anode materials. When he first entered the lithium battery industry, according to Zheng Yonggang's afterthought, "11 out of 10 people said I was crazy."

　　At that time, my country’s lithium battery field was almost blank, the world’s lithium battery industry was monopolized by Japan, and this research was also facing a bottleneck. The 17 million scientific research funds allocated before were exhausted, but the results had not yet fully met the requirements of the subject. . Zheng Yonggang decided to invest to support research and make lithium battery materials. In 2001, the active mobile phone market promoted the domestic lithium battery industry to enter a stage of rapid growth. Japan gradually lost its monopoly in the lithium battery industry, and my country's first batch of lithium battery companies such as BYD, BAK and Lishen began to appear. During that time, the growth rate of the lithium battery industry was as high as 30%. In such a fast-growing market, do you do it or not?

　　Zheng Yonggang decides: Do it! Therefore, Shanshan began to build a production line in Pudong, Shanghai, specializing in lithium battery anode materials. Although the industry is booming, in fact, at that time, anode materials were not what you wanted to do, you could do it if you wanted to. The layout in this field is 8 years at a loss. According to Zheng Yonggang’s description, “The loss was a mess. At that time, there were 8 people on the board of directors and 7 objections.” In this case, we still resolutely transform - because if we don’t transform and continue to make suits, then business will be very good. Hard to do. Later events verified their judgment. Now the listed companies on the clothing track, such as George White, Dayang Chuangshi, and Shinur, are basically reduced to "shells." Today, George Bai is still floating around in the market as a shell company, Dayang Chuangshi has been backdoored by Yuantong, and Shinur has been acquired by Cedar Holdings. Even if you die, you have to transform.

　　The process of lithium batteries is basically divided into five major parts: positive electrode, negative electrode, separator, electrolyte, and packaging. Shanshan continued to grind his teeth and lay out on this track-the first anode material was made, and the cathode material was laid out in 2004 to produce lithium cobalt oxide. In 2006, began to lay out the electrolyte. In 2007, the lithium battery industry ushered in a major turning point-the emergence of the iphone, Apple began to gradually become the leader of the mobile phone industry, and launched a business model tied to the industry chain.

　　At that time, Apple bound a Chinese battery company called ATL. This company is now the world's number one soft-pack lithium battery company. As we analyzed before, it is the first startup company of the founder of CATL, Zeng Yuqun. ATL is a major customer of Shanshan shares. Relying on binding ATL to enter Apple's supply chain, Shanshan's lithium battery business finally opened up and began to make a profit.

　　Since 2014, another outlet in the field of lithium batteries has arrived-the core component of new energy vehicles: power batteries. The Ningde era has rapidly risen in the industrial chain, and has surpassed Japan's Panasonic (Tesla supplier) to become the world's number one power battery company. And Shanshan shares chose to bind CATL to provide it with negative electrode materials. The strategy of binding downstream has finally allowed it to become a major player in the new energy vehicle market from a traditional company that makes suits. As of 2017, Shanshan, who was originally a suit maker, has evolved into a global leader in battery materials. According to the research report of Dongxing Securities, it ranks No. 1 in the positive electrode business in the world, No. 1 in the negative electrode material in China, and the top five in the electrolyte business in China.

　　Five blocks of battery materials, it occupies three

　　Shanshan shares business, including lithium battery materials, clothing, and the investment layout of the new energy automobile industry chain, such as charging piles, battery packs, distributed photovoltaics, etc.

　　From 2015 to 2017, Shanshan's revenue was 4.302 billion, 5.475 billion, and 8.271 billion; net profit attributable to parent company was 665 million, 330 million, and 896 million; operating cash flow was- 258 million, -578 million, -381 million; gross profit margins were 23.87%, 21.66%, and 25.39%.

　　The largest piece of its business is the lithium battery materials business, which accounted for 72.98% of revenue and 71.28% of gross profit in 2017.

　　Several parts of lithium battery materials-positive electrode material, negative electrode material, separator, electrolyte, packaging. The approximate process ratio is 2 parts positive electrode + 1 part negative electrode + 0.9 parts electrolyte. The upstream of battery materials are various metal resources, such as lithium, cobalt, and nickel, and the downstream are consumer electronics and new energy vehicles.

　　In the field of materials, Shanshan shares three major sectors: positive electrode, negative electrode, and electrolyte.

　　In 2017, its cathode material accounted for 70.56%, the world's largest production and sales scale; the anode material accounted for 24.55%, the largest domestic production and sales scale; the electrolyte accounted for 4.87%, ranking among the top five in China . The comprehensive scale in the field of battery materials ranks first in the world.

　　In fact, in the field of battery materials, it was once monopolized by the Japanese in the early days. Around 2010, China completed the localization of all core raw materials, such as cathode materials, anode materials, electrolyte, copper foil, and separators, and some terminal products have basically been localized in China. Originally relying on imported Japanese and American materials, China has now all achieved mass production. At the beginning, 80% of Chinese products relied on imitation and 20% were innovated. Starting in 2012, 80% relied on innovation and 20% relied on imitation. Now the proportion of independent innovation is rapidly increasing. At the beginning, China, South Korea and Japan were in a three-legged trend. Now Japan's share is getting lower and lower, and China's share is close to 60%. Today, China is not only the world's largest consumer market for lithium-ion batteries, it is also the market with the most concentrated lithium-ion battery industry chain and the largest output.

　　From the perspective of the split of the battery material industry chain, scale and cost are the core moat

　　In order to study Shanshan clearly, one must look at a wider range and take a look at the battery material industry chain. This field can be divided into 4 rings: the first ring is a resource; the second ring is a compound, such as cobalt salt; the third ring is a precursor; the fourth ring is a material. The prices of these four rings are affected by resource prices and fluctuate almost simultaneously, but note that the gross profit margins of different companies in each track vary greatly.

　　Cathode material-Shanshan shares, the gross profit margin of the cathode material business in 2017 was 24.8%, and the current production capacity was 43,000 tons; Dangsheng Technology, the gross profit margin of the cathode material business in 2017 was 18.55%, and the current It has a production capacity of 16,000 tons; Xiamen Tungsten, the gross profit margin of the cathode material business in 2017 was 13.9%, and the existing production capacity was 17,000 tons;

　　Anode material-BTR, the gross profit margin of the anode material business in the first half of 2017 was 35.04%, and the production capacity was about 60,000 tons. Shanshan shares, the gross profit margin of the anode material business in 2017 was 27.19%, the production capacity was 60,000 tons, the electrolyte-Tianci Materials, the gross profit margin of the electrolyte business in the first half of 2017 was 45.53%, and the production capacity in 2017 was about 40,000 Ton. Xinzhoubang has a gross profit margin of 32.48% in its electrolyte business in 2017, and its production capacity in 2017 was approximately 36,000 tons. Shanshan has a gross profit margin of 14.69% in its electrolyte business in 2017, and its 2016 production capacity is approximately 30,000 tons.

　　Research in the field of battery materials requires special attention to product quality and cost. Product quality stability and cost reduction are the goals pursued by the entire industry chain. In this field, there is an index in the production of products called the straight-through rate, which is: products can be delivered once they are made. If the product is of low quality and cannot be delivered and must be reworked, the cost will increase exponentially.

　　How to guarantee the through rate? The five influencing factors of people, equipment, environment, raw materials, evaluation and analysis. The current battery production requirements for cleanliness are closer to the requirements of semiconductor production. Once the number of dust particles exceeds the standard, it may cause quality problems such as swelling.

　　In contrast, it is obvious: In the battery material industry chain, whoever has high production capacity, good quality, large scale and low cost, who can better meet the needs of downstream customers, may have higher gross profit—— At this