Ning Wang: Stable enough, just turned "mediocre"

On the evening of July 25, 2023, CATL announced its first half 2023 results. Dolphin Jun dismantled the second quarter results, focusing on marginal changes. Look at both ends first:. And behind this set of data is a steady Ning Wang: **1) Overcapacity? Mainly to protect gross profit. * * In the first half of the year, the capacity utilization rate of Ningwang battery business was only 60%, and the superposition inventory had been reduced to 60% at the peak, while the gross profit margin rose steadily to 22%. Ning Wang, as the industry leader, did not take the initiative to cut prices to eliminate opponents like downstream leader Tesla at a time of overcapacity. * * 2) The product is still releasing inflation. * * Battery shipments in the second quarter were 95Gwh, up 25% from the previous quarter, but the current income was less than 13% from the previous quarter. * * 3) Increment by Energy Storage + Overseas: * * Due to the gross profit keeping method, Ning Wang's revenue increase is mainly supported by the continuous volume of energy storage + rapid overseas expansion, but the scale effect of these two business operations is slightly worse than that of batteries, as a result, the release of operating leverage was blocked, and the growth rate of sales and management expenses exceeded revenue in the second quarter was too obvious. * * 5) The actual profit is not as good as the parent profit: * * The main core operating profit due to the removal of financial income is 9 billion, and the profit margin is only 9%, which is a further decline from the first quarter. In terms of sub-items, this is mainly due to the relatively rapid growth in management expenses (70% + year-on-year) and sales expenses (90% +). And the asset impairment issue from the second quarter of the situation does not need to be particularly worried.! Dolphin Jun's overall view: Since the last earnings report, Ning Wang has performed well, but the share price has not risen. The characteristics of the second quarter results Ning Wang's biggest feature is still the "Taishan pressure and I calmly deal with" the leader of the sense of stability. Revenue exceeded expectations, profits in line with expectations, their own inventory may come to an end, these factors are in the interest of Ning Wang's share price short-term repair. But the fundamentals of Ning Wang's industry, which is reflected behind this earnings report, have not substantially improved. This fundamental is: 1) the increase in the proportion of hybrid motor vehicle delivery leads to the growth rate of new energy sales> the growth rate of power battery shipments, while the previous industry production capacity investment is radical, the growth rate of power battery shipments> the growth rate of power battery revenue, and the industry is in the midst of overall inflation relief; 2) Ning Wang has stabilized battery shipments and performance growth through energy storage replenishment + overseas development, however, the energy storage barrier may be weaker than that of the power battery + the long-term stability of the overseas market may not be as good as that of the domestic market. These are all discounts on the valuation outlook. 3) As the leader in batteries, Ning Wang chose a completely different approach from Tesla: actively de-stocking + reducing capacity utilization to maintain gross profit margin, instead of opening up sufficient capacity to combat industry competition. The result is to preserve gross margins, but the logic of growth will be weaker. 4) Taken together, Ning Wang's own Alpha ability is weak, the stock price is more to follow the lithium-electric inflation chain, lithium mine prices continue to decline, Ning Wang, although relatively undervalued, but the valuation expansion is not catalytic. The corresponding overall performance path is that in the process of de-stocking in the industry, Ning Wang kept its gross profit, but the market share logic caused its growth to be affected to a certain extent, the main profit margin due to the second curve energy storage + overseas market development needs more sales and operational investment, resulting in the operating leverage can not be released smoothly. This mapping on the stock price is likely to be that Ning Wang's current performance is good, especially the active de-stocking is nearing the end, which may have some boost to fundamentals and the stock price is repaired in the short term. But as long as lithium is in the process of deflating inflation, Ning Wang can only rely on performance delivery to stabilize the share price, and can not achieve valuation expansion, upward elasticity is limited. In a word, Ning Wang is still Ning Wang, but the investment angle has now become mediocre. The first quarter results have been announced, Dolphin Jun focused on the second quarter marginal changes reflected in the half-year results, the following is the text: **1. overall performance: revenue is good? Mainly rely on energy storage + overseas to make up * * * * 1) revenue and net profit * *: revenue in the second quarter of 2023 was 100.2 billion, up 56% year-on-year. Dolphin Jun saw that the seller's expectation was generally below 100 billion RMB, and the revenue performance exceeded the market expectation.! But one problem here is that from a month-on-month perspective, battery shipments in the second quarter exceeded 95Gwh, up 27% month-on-month, but revenue in the corresponding first quarter increased only 12.5 percent month-on-month. This shows that the price of lithium-electric single wh is still in the process of "venting inflation. At the same time, two other data also verify the same problem: a) capacity utilization rate; B) inventory. A) Let's look at the capacity utilization rate first: the capacity utilization rate in the first half of this year was only 60%, which is visible to the naked eye.! B) Ning Wang has continuously taken the initiative to reduce inventory levels by reducing capacity utilization in the last six months. By the end of the second quarter, CATL's inventory was 48.9 billion RMB, cut to 60% of its peak.! According to the data previously disclosed by Ning Wang, Dolphin Jun roughly estimated that such an inventory level corresponds to about 50Gwh. Judging from the stock level, it only corresponds to about 50% of Ningwang's quarterly battery shipments. One and a half months of stock, from the point of view of the procurement cycle, has been relatively short, can adapt to the market price of raw materials change speed. At this current inventory level, Dolphin Jun believes it is already relatively healthy. The risk of continued downward movement in inventory levels is relatively low with shipments still up next. After the active destocking gradually enters the end, the key to the back of the stocking power is still to see the marginal improvement in battery demand. However, in terms of marginal trends, a common embarrassment in the power battery market this year is: 1) As the growth rate of hybrid vehicles with low capacity in the delivery structure of new energy vehicles is higher than that of pure trams, the growth rate of power battery loading continues to be lower than that of new energy sales. 2) Due to the downward price of lithium ore, the overall release of inflation in the lithium-electric industry chain, the unit price of lithium-electric down, the growth rate of power battery revenue is obviously less than the growth rate of power battery loading.! And after the layers of shrinkage, **high growth can only be sustained by new battery demand-energy storage, as well as access to more markets-offshore, to compensate for the slowdown in the growth of the main track. * * Combined with the first half of the sub-items, CATL's steady growth mainly comes from two aspects: a) overseas markets; B) energy storage replacement. a) Overseas market: It can be seen that in the first half of 2023, Ning Wang's overseas battery revenue accounted for more than 35% of the total battery + materials. The pull-up is very obvious. Overseas market is the key to Ning Wang's growth. B) Energy storage replenishment: In addition, the growth rate of energy storage revenue was still 120 in the first half of the year, the revenue contribution ratio remained at 15%, and the growth performance was relatively good.! **c) mediocre performance in China: * * in the domestic market, the growth rate of battery + materials + energy storage business has dropped to 38% in ning Wang, basically keeping pace with the 36% growth rate of domestic power battery loading in the same period in ning Wang, which is equivalent to filling the price inflation of battery + materials with the increment of energy storage business.! * * The profit side of the 2. was fairly regular * * The net profit returned to the mother in the second quarter was 10.9 billion yuan, with a profit margin of 11%, basically maintaining the profitability of the first quarter,. However, since there are non-operating investment gains and losses in the return profits, as well as interest income related to the company's financial leverage, Dolphin Jun is more concerned about the operating profit (income -taxes -three fees -assets & credit impairment) of a single **core business pulled out of the U.S. stock peers. * *! And looking at this core profit, you will find that the profitability of the main business actually declined in the second quarter, falling back to 9% from 9.6 in the previous quarter, a mediocre performance. The reason why the return to the mother looks good is mainly because there is too much cash on the current Ning Wang account, the increase in cash management income, and the appreciation of the foreign exchange position held, the additional income brought by the conversion into RMB.! The core main profit performance is general. * * 2.2 gross profit margin control is not bad: * * gross profit margin in the second quarter was 22%, a significant improvement from 21.3 in the first quarter. And combined with the changes in the gross profit margin structure in the first half of the year, Ningwang's gross profit margin performance should be the repair of the gross profit margin of the power battery itself.! ! In the industry and its own overcapacity, Ning Wang's gross profit margin has been maintained and even improved. In addition to the bargaining power that Ning Wang's own products can bring, there is also a logic that jumps out at paper: under this kind of thinking, Dolphin Jun tends to think that in the process of continuous inflation release in lithium mines,.! 2.3 Expense side: weak ability to control fees With the rapid expansion of the company's business scale, the company's corresponding expense scale also showed a rapid expansion trend, before due to the rapid growth of revenue, basically able to fully dilute management, research and development and sales costs and so on. However, in the second quarter of this year, this actually seems to have reversed somewhat: the year-on-year growth rate of the after-sales comprehensive service fee for the largest project in sales expenses was still 70% +, and the growth rate of employee compensation for the largest project in administration was also 70% +. Taken together, it seems to be related to the need for more sales operations for energy storage and the corresponding higher operating expenses for overseas market development. But overall, the leverage effect on the short-term operating side is gone.! April 21, 2023 king ning: perfect counterattack expectation? A thick family is the key April 21, 2023 CATL: energy storage, overseas two grasps, gross profit is stable (summary) March 9, 2023 financial report review CATL: car factory cries, battery laughs, how far can the money earned like this go? 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