Source: Times Weekly Author: He Mingjun

6 billion lowered to 1.4 billion, positive material manufacturers set a large change in the amount of increase.

on November 15, Zhenhua new materials (688707.SH), a manufacturer of lithium battery cathode materials, announced that in combination with the changes in the current market environment and the actual situation of the company, the company is now adjusting the scale of the raised funds for issuing a shares to specific objects, and adjusting the scale of the raised funds from no more than RMB 6 billion yuan (inclusive) to no more than RMB 1.4 billion yuan (inclusive).

photo source: screenshot of Zhenhua new material announcement

The announcement shows that Zhenhua New Material has significantly reduced the amount of funds to be raised for the fixed increase project. Among them, the cathode material production line construction project with a total investment of 6.245 billion yuan (Yilong Phase III) was reduced from 4.5 billion yuan before the adjustment to 1.2 billion yuan, and the supplementary working capital was reduced from 1.5 billion yuan to 0.2 billion yuan.

Zhenhua New Material's newly disclosed 1.4 billion yuan fixed increase has been reduced by more than 75% compared with the previous 6 billion yuan. "The previous substantial increase in pre-investment funds should be due to factors such as adjustments in technology or production lines." Yu Shaobo, chairman of the board of directors of the promotion of investment management Co., Ltd., said to the times weekly reporter.

on the issue of fixed increase, the reporter of time weekly called zhenhua new material dong mi office. The relevant staff replied, "The reduction of the fixed increase scale is mainly combined with the comprehensive consideration of the secondary market. In addition, to reduce the investment of raised funds, the remaining part will be supplemented by own funds or other financing methods."

Cathode materials "arms race"

What is the purpose and consideration of Zhenhua New Material for the initial 6 billion yuan fixed increase plan?

According to the Institute of Lithium Electricity (GGII), China shipped 655GWh of lithium batteries in 2022, up 100 percent year-on-year. Among them, power battery shipments of 480GWh, an increase of more than 110; energy storage battery shipments of 130GWh, an increase of 170.

some institutional data also pointed out that 1.89 million tons of cathode materials were shipped in 2022, up 68% year on year. from the breakdown point of view, 1.113 million tons of lithium iron phosphate materials were shipped, up 132 year on year. Ternary materials shipped 639000 tons, up 47% year on year. Compared with ternary materials, lithium iron phosphate materials are more likely to benefit from the reduction of power batteries and the growth of energy storage batteries.

Zhenhua Xincai mentioned in the prospectus for issuing A shares to specific targets in 2022 that "due to its low-cost advantage over ternary cathode materials, the application proportion of lithium iron phosphate anode materials is continuously increasing. According to the data of China's Automotive Power Battery Industry Innovation Alliance, the installed capacity of lithium iron phosphate power batteries will increase from 36.65 in 2020 to 62.36 in 2022".

Source: Zhenhua New Material official website

according to GGII and xinmi lithium battery data statistics, the industry CR3 and CR5 concentration of ternary cathode shipments increased year by year during 2018-2021, with little change in the ranking and share of leading enterprises, with CR3 30.5, 31.4, 35%, 38%,CR5 48.20, 49.7, 52%, 55%, among them, Zhenhua new material market accounted for 9.87, 9.9, 7%, 8%.

In the case of small gap between the head enterprises, Zhenhua New Material needs to face the industry "arms race"-capacity expansion.

due to the high overall market concentration in the lithium battery ternary cathode material industry, Zhenhua new material's main competitors include rongbai technology (688005.SH), long-term lithium technology (688779.SH), xiamen tungsten new energy (688778.SH), dangsheng technology (300073.SZ), BASF cedar battery material co., ltd. and Tianjin balmo technology co.

Rongbai Technology belongs to the first echelon of positive materials. In 2022, Rongbai Technology built 250000 tons of high nickel production capacity, so its high nickel, ultra-high nickel cathode material shipments growth rate is higher than the overall growth rate of the ternary materials industry, especially in high nickel low cobalt, ultra-high nickel has achieved a thousand-ton shipment, lithium manganese iron phosphate is also close to a thousand-ton shipment.

and Zhenhua New Material has a large single crystal technology system and three sintering process, in the industry are in a leading position in technology, and Rongbai Technology can be regarded as the same level. However, in terms of production capacity, after the 20000-ton/year Yilong Phase II positive material project was put into operation, Zhenhua New Material barely kept up with the speed of the industry's first-tier echelon.

Zhenhua New Materials pointed out in the 2023 semi-annual report: "At present, the market share of the cathode material companies with the top market share is relatively close, and there is no company with absolute market share. Existing cathode material companies have expanded their production capacity, and market competition has intensified, affecting the sales price and profit margins of cathode materials. Secondly, the rapid development of the cathode material market in recent years has continuously attracted new entrants to break through industry technology, capital and other barriers through direct investment, industrial transformation or mergers and acquisitions, and enter the cathode material industry."

Pacific Securities Research Report has also pointed out that there is a gap between the company's ternary positive production capacity and the industry's leading enterprises, and the growth of production capacity has limited the company's positive sales growth to a certain extent. In the short term, with the production capacity of 26000 tons of Shavin II and 20000 tons of Yilong II reached, in the long term, with the gradual landing of the 100000-ton production capacity planning of Yilong III, the company's overall revenue and market share are expected to continue to expand.

At present, the industry expects Zhenhua New Material to rapidly expand its market share after the third phase of Yilong. The first-tier companies in the industry are also seeking a larger market share, which means that the industry concentration continues to increase, and the window period for Zhenhua New Materials is not long.

the first half of the year into the loss, the beginning of the recovery signal

Despite relatively clear future expectations, Zhenhua New Material's performance in the first half of 2023 is not optimistic.

The 2023 semi-annual report shows that Zhenhua New Material achieved operating income of 3.258 billion yuan, a year-on-year decrease of 40.11; net profit attributable to the parent -35.794 million yuan, a year-on-year decrease of 105.37. At the semi-annual performance presentation meeting, the management of Zhenhua New Materials summarized the reasons for the single-ton profit loss in the first half of the year. "The company's loss in the first half of 2023 was mainly due to two reasons. The first capacity utilization rate was low; the second inventory fell."

"The capacity utilization rate in the first half of 2023 is about 40%, and it is currently about 70%. If the second half of the year can develop as expected, high nickel is expected to be close to 40%." Zhenhua New Material said.

The third quarterly report shows that in the first three quarters of 2023, the company achieved operating income of 5.281 billion yuan, a year-on-year decrease of 46.68; realized net profit of 0.038 billion yuan, a year-on-year decrease of 96.26; realized non-return net profit of 0.041 billion yuan, a year-on-year decrease of 95.86%. From a single quarter point of view, although the third quarter profit did not increase, but the performance began to show signs of recovery.

In the third quarter of 2023, the company achieved operating income of 2.023 billion yuan, a year-on-year decrease of 54.68 percent, and a month-on-month increase of 61.57 percent; realized a net profit of 0.073 billion yuan, a year-on-year decrease of 78.42 percent, and a month-on-month decrease of 168.95 percent; realized a non-return net profit of 0.076 billion yuan, a year-on-year decrease of 77.17 percent, a month-on-month decrease of 171.45 percent.

a private equity fund to the Times Weekly reporter analysis: "Zhenhua new material may be starting a new inventory cycle, performance began to recover. In the first half of the positive material manufacturers basically every 'mis', the industry's major customer operating rate did not rise, but also the army can not rise, and most of the positive electrode manufacturers a single large customer's proportion is not small." According to the Times Weekly reporter, Ningde Times (300750.SZ) is one of Zhenhua New Material's customers.

for next year's shipments, Zhenhua New Material made a prediction in a recent investor relations record. "With the expansion of the domestic new energy industry chain and market scale, the penetration rate continues to grow. It is expected that the capacity utilization of several companies in the head of Sanyuan Materials will be effectively improved next year." Zhenhua New Material said.

on November 15, Zhenhua new materials closed at 23.85 yuan/share, up 1.06.