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Compared with 2017, the performance growth of lithium battery companies began to show a significant slowdown.

In the first half of 2018, the production and sales of new energy vehicles in China continued to boom. The output and sales of new energy vehicles were 413000 and 412000, respectively, with year-on-year growth of 94.9% and 111.5%. As a result, most of the 46 A-share lithium battery listed companies reported good results.

From the 42 lithium battery companies that have announced the performance of the 2018 midterm report (power lithium battery companies are included in the interface news, and enterprises whose operating revenue accounts for less than 5% are excluded), 25 companies' net profits attributable to the shareholders of the parent company (hereinafter referred to as "net profits") are growing at a positive rate on a year-on-year basis, of which 6 companies' year-on-year growth exceeds 100%, and 8 companies are between 50% and 100%.

However, compared with 2017, the performance growth of lithium battery companies began to show a significant slowdown. According to the statistics of the interface news, in the first half of this year, the year-on-year growth rate of net profits of 29 companies in the lithium battery sector was lower than that of the same period last year, accounting for 69.05%.

The interface news believes that the above situation is mainly caused by two reasons:

On the one hand, since 2014, the downstream new energy vehicle industry of lithium battery has continued to grow at a high speed for four years. Even in 2016, when the suspicion of fraud was shrouded, the industry's growth rate exceeded 50%. During this period, the number of enterprises involved in the lithium battery industry increased significantly. The technology in various subdivisions of the industry has been very mature, the supply and demand situation has also reversed, and the market competition is very fierce. The profit growth of related enterprises naturally shows an inevitable slowdown.

On the other hand, the new policy of subsidies for new energy vehicles implemented in the first half of this year also had a considerable impact on the lithium battery industry.

The policy clearly stipulates that February 12 to June 11, 2018 is the transition period of the new policy on subsidies for new energy vehicles, during which the subsidies for licensed passenger cars and passenger cars will be implemented at 0.7 times of 2017; The subsidy for freight cars and special vehicles is 0.4 times of that in 2017; In addition, after June 12, the subsidy for 100-150km new energy vehicles will be cancelled; The subsidy for 150-200 km will be reduced by nearly 40%.

The reduction of subsidies received by vehicle manufacturers not only directly led to the fact that power battery companies were forced to reduce prices for shipment, but the price reduction in the first half of the year was generally about 15% - 25%; Moreover, due to the previous blind expansion, the industry experienced a large degree of low-end overcapacity. After the implementation of the subsidy policy, power battery companies generally took clearing low-end inventory as the primary task, further reducing their profit margins.

The decline of the power battery company was immediately transmitted to all kinds of lithium battery material companies related to it, which ultimately led to a significant decline in the performance growth of the entire lithium battery sector.

In fact, the market seems to have expected a slowdown in the performance growth of companies related to the lithium battery sector this year. Although the sector rebounded before and after the Spring Festival, the rest of the time was dominated by a downward trend. As of the end of August 30, the sector had fallen by 31.39%, and the stock prices of as many as 26 companies in the sector had fallen by more than 30%, of which Jianrui Voneng had fallen by 72.97%, followed by Guoguang Electric and Jiawei Shares, The decline reached 68.07% and 63.38% respectively.

However, it is worth noting that after September, new energy vehicles will usher in the traditional peak season of the year, especially when subsidies are likely to decline further next year, vehicle manufacturers will probably accelerate production to obtain more subsidies, which undoubtedly constitutes a strong support for the performance of related companies in the upstream lithium battery sector.

With the continuous decline of the stock price before, the median valuation of the entire lithium battery sector has dropped to 16.96 times, with a certain margin of safety. Investors can pay attention to the production and sales data of subsequent industries and make comprehensive decisions based on the company's performance and valuation.

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