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The following is a comparative analysis of the main power lithium battery companies in China.

1.1.1 Major lithium battery companies

No.1 BYD - whole vehicle+lithium battery

Established in 2006

BYD's power battery business is mainly distributed in two bases in Huizhou and Shenzhen, with its main products being lithium iron phosphate power batteries. The current effective production capacity is 4.5Gwh, including 1Gwh in Huizhou and 3.5Gwh in Shenzhen. It is expected that the overall production capacity will reach 6Gwh by the end of 2015 and expand to 10Gwh in 2016. BYD's power batteries are only for BYD's own use. In the first half of 2015, BYD's power battery business revenue was approximately 3 billion yuan.

Reason for being on the list: BYD is definitely the leader in domestic power batteries, relying on the group's new energy vehicle business, its power battery business is far ahead of its competitors in scale. In terms of technical system, BYD, which has always adhered to the lithium iron phosphate technology route, has recently chosen ternary material batteries in its next generation models. It is reasonable to believe that regardless of the technology route, BYD, relying on its years of battery production experience, will definitely be able to do a good job in batteries. On the industry chain, BYD adheres to the strategy of the entire industry chain. From materials to batteries, motors, electronic control, and even the entire vehicle, BYD chooses to do it on its own. The closed-loop development model of the industry chain can only be played by companies as large as BYD.

NO.2CATL - Japan and South Korea Opponents

Established in 2011 Headquarters: Ningde, Fujian

CATL relies on ATL, headquartered in Ningde, Fujian, and has a production base in Qinghai, with a total production capacity of 1.4 GWh. Its main customers include BAIC, BMW Brilliance, Geely, FAW, CRRC Times, Xiamen Jinlong, Zhengzhou Yutong, and Zhongtong Bus. In 2014, CATL's sales revenue from power batteries was approximately 860 million yuan. In the first half of 2015, the sales revenue from power batteries was approximately 950 million yuan.

Reason for being on the list: As the only domestic competitor compared to Japanese and Korean power battery companies, CATL's comprehensive competitiveness in the field of power batteries is leading in China. Although the scale of power batteries cannot currently rank as the industry leader, its battery technology and quality have been recognized by the international luxury brand BMW, making it the first and only power battery company in China to provide support to international car manufacturers. In addition, CATL's layout in the industrial chain is also quite comprehensive, from materials (Dongguan Kaixin, Jiangxi Zichen, TNS) to battery packs (battery cells, BMS, battery systems) and then to recycling applications (Guangdong Bangpu), and even has entered the field of lithium battery equipment. Unlike ATL's low-key approach, CATL also spares no effort in corporate promotion and publicity, and its upcoming series of capital operations will also be a major event in China's lithium battery industry in the future.

Ningde Times allocates 5% of its annual revenue as research and development funds. The company has more than 120 PhDs (including more than 20 overseas PhDs) and over 900 talents with master's degrees. As of 2015, Ningde Times currently has 335 technology patents for its battery products,

NO.3 Guoxuan - Listed Company and National Key Support

Established in 2005 Headquarters: Hefei, Anhui

Hefei Guoxuan High tech Power Energy Co., Ltd. (hereinafter referred to as "Guoxuan") was established in 2005, initiated by Zhuhai Guoxuan Trading Co., Ltd. and Hefei Guoxuan Marketing Planning Co., Ltd. Its main product is lithium iron phosphate power batteries.

Guoxuan High tech is headquartered in Hefei, Anhui, and is also building new production bases in Kunshan, Nanjing, and Wuhan. The industrial chain covers links such as lithium iron phosphate cathode materials, battery cell production, BMS, and PACK. The current effective production capacity of Guoxuan High tech is 1.5Gwh, mainly consisting of square and cylindrical power battery cells. The main customers of Guoxuan High tech include Nanjing Jinlong, Jianghuai Automobile, Ankai Bus, Zoomlion Heavy Industry, Shanghai Shenwo, Dongfeng Automobile, Hebei Yujie, etc. In the first half of 2015, the operating revenue of Guoxuan High tech Power Battery was about 750 million yuan.

Reason for listing: After the backdoor listing of Dongyuan Electric Appliances in 2015, Guoxuan High tech has become the most authentic power battery target for A-share listed companies. The popularity of new energy vehicles in the capital market has also made Guoxuan High tech's market value reach 25 billion yuan. From the perspective of customers, Guoxuan High tech mainly focuses on commercial vehicles, and is mainly concentrated in Ankai and Jianghuai. There are relatively few orders in the passenger car field, and its future competitiveness will also depend on its performance in the passenger car field. In the situation where other power battery companies are making meager profits, Guoxuan High tech can maintain a high gross profit margin, which can also be considered a "miracle" in the lithium power battery industry.

There are over 461 research and development personnel. More than 50% of them have master's and doctoral degrees. R&D investment is about 5% of revenue.

According to the final equity incentive plan, the company has granted over 14 million restricted shares to more than 160 incentive recipients, all of whom are directors, senior management personnel, middle-level management personnel, and core technical (business) personnel who served during the implementation of this plan.

As of now, the company has applied for more than 500 patents and authorized nearly 300 patents. The patent achievements cover the entire process of battery preparation and application, including the preparation of positive electrode materials, battery preparation technology, grouping technology, screening technology, PACK technology, and raw material design

No.4: Wanxiang A123 System Co., Ltd

Established in 2011 Headquarters: Hangzhou, Zhejiang

Zhejiang Wanxiang Yineng Power Battery Co., Ltd. is a Sino foreign joint venture established by Wanxiang Group and Ener1 Inc. in July 2011, with a registered capital of 120 million US dollars. Its main business is the design, service, and technological upgrading of lithium-ion batteries and lithium-ion battery systems assembled from power batteries. The patented technology of Wanxiang Yineng Power comes from Ener1 Company in the United States, which uses Ener1's automatic battery pack assembly technology.

Wanxiang A123 System Co., Ltd. was established after Wanxiang acquired A123 and reorganized its A123 and Wanxiang electric vehicle power battery businesses. Currently, it is the new platform for Wanxiang Group's power battery business. The Wanxiang A123 adopts the technology route of flexible packaging lithium iron phosphate and ternary materials, and its current effective production capacity is about 1Gwh. The main customers are SAIC Group, Chery Automobile, GAC Group, Nanjing Jinlong, Xiamen Jinlong, Yutong Bus, Shanghai Shenwo, CRRC Times, etc. In the first half of 2015, the revenue of Wanxiang Power Battery business was approximately 350 million yuan.

Reason for listing: After the business restructuring in 2015, there are still many problems that need to be solved for the new Wanxiang A123, such as personnel integration and corporate culture integration. However, as a leading enterprise in domestic soft pack power batteries, Wanxiang power batteries have certain competitiveness in technology and quality. More importantly, the layout of Wanxiang Relying on Group in the industrial chain is also worth looking forward to in the industry. Upstream investors have invested in Guangzhou Tianci, downstream investors have invested in Guangzhou Automobile Group, and investors have invested in Tianjin Songzheng through Wanxiang Money Tide. It is believed that with the gradual profitability of Wanxiang's electric vehicle and power battery businesses, it will be a matter of time before Wanxiang's money flows into the listed company.

NO.5 Power God - Strong Strength

Established in 1997 Headquarters: Tianjin

Tianjin Lishen is a subsidiary of China Electronics Technology Group, and its power battery production base is located in Tianjin. It plans to build new power battery production bases in Wuhan, Qingdao, and other places. Its power battery products cover lithium iron phosphate square and cylindrical, ternary square and cylindrical, etc. Currently, its effective production capacity is about 1Gwh, and its main customers include Jianghuai, Geely, FAW, Dongfeng Motor, Nanjing Jinlong, Xiamen Jinlong, Zhongtong Bus, Tianjin Qingyuan, etc. In the first half of 2015, its power battery business revenue was approximately 570 million yuan.

Reason for being on the list: 2015 can be considered an extremely important year in the development history of Lishen. The major shareholder CNOOC withdrew, and China Electronics Technology Group (CECT) became the controlling shareholder of Lishen again. After the change of ownership, Lishen Battery has not yet broken free from the mechanism of central enterprises, and compared to its competitors, Lishen always takes a step slower. However, as a leading enterprise in lithium-ion batteries, Lishen still has considerable competitiveness in technology and products. In 2015, it began to supply cylindrical 18650 ternary battery cells to Jianghuai on a large scale through Huating Power. Recently, there have been rumors that Lishen is conducting a series of capital operations. Only by reforming the mechanism can Lishen further enhance its competitiveness.

NO.6 Waterma - acquired by Jianrui Fire

Established in 2002 Headquarters: Shenzhen, Guangdong

Shenzhen Wotma Battery Co., Ltd. was established in 2002. The company currently has more than 1300 employees and over 300 research and development personnel. It currently produces 220000 units of 32650 type 5Ah battery cells per day, and the planned production capacity of the new factory area is 500000 units of 32650 type 5Ah battery cells per day. It is one of the earliest domestic enterprises to successfully develop lithium iron phosphate new energy vehicle power batteries and achieve large-scale production and batch application.

The main cooperative customers of the company's power battery are Wuzhoulong, Jinlong, Yangzhou Yaxing, Zhengzhou Haima, Zoomlion Heavy Industry, etc.

NO.7 AVIC - With a Deep Background

Established in 2009 Headquarters: Luoyang, Henan Province

The production base of AVIC Lithium Battery is located in Luoyang, with an overall effective production capacity of approximately 2Gwh. AVIC Lithium Battery is currently constructing a Phase III project in the Luoyang Industrial Park, with a planned production capacity of 5Gwh. In addition, it plans to invest 12.5 billion yuan in the production of power batteries in Jiangsu. At present, our main customers include Dongfeng Motor, Shaolin in Henan, LandArk, Nanjing Jinlong, Sichuan Yema, Zhongtong Bus, Chongqing Ruichi, etc. In the first half of 2015, its power battery business revenue was approximately 400 million yuan.

Reason for being on the list: As one of the few lithium battery companies with a background in state-owned enterprises in China, AVIC Lithium Battery is the most publicly listed power battery company in the country. However, customers mainly focus on commercial vehicles and can quickly increase their performance in the short term, as commercial vehicles cannot sustain high-speed growth. The future growth momentum also depends on passenger cars. On the other hand, the large-scale investment of AVIC Lithium in Jiangsu and Luoyang requires a large amount of funds, which cannot be met solely by the parent company's issuance. In the future, there is a large space for large-scale capital operations with AVIC Lithium as the core.

NO.8 Weineng - Shandong Marquises

Established in 2006 Headquarters: Shouguang, Shandong

Shandong Weineng Environmental Power Co., Ltd. was established in 2006 and is a subsidiary of Shandong Weineng Environmental Power (Group) Co., Ltd. Shandong Weineng Environmental Protection Group has five subsidiaries: Shandong Weineng Environmental Protection Power Supply Co., Ltd., Qingdao Weineng Electric Vehicle Electronic Control Co., Ltd., Qingdao Diaphragm New Materials Co., Ltd., Beijing Wuhe Power Technology Co., Ltd., and Kunshan Weineng Environmental Protection Power Supply Co., Ltd.

Weineng has power battery production bases in Shouguang, Shandong and Qingdao, mainly consisting of lithium iron phosphate and ternary square battery cells. Currently, its overall production capacity is 1Gwh, and its main customers include Nanjing Jinlong, Shanghai Shenwo, Zhongtong Bus, Zotye Automobile, etc. In the first half of 2015, the revenue of Weineng Power Battery business was approximately 200 million yuan.

Reason for being on the list: Currently, almost all orders from Weineng Environmental Protection come from the commercial vehicle sector, and only Zotye Automobile is using Weineng Environmental Protection's ternary batteries for passenger cars. The rapid growth of Weineng Environmental Protection is also due to the booming commercial vehicle market in 2014 and 2015, and its future growth potential still depends on its layout in the passenger car field.

NO.9 Micro Macro - Unique and Unique

Established in 2006 Headquarters: Huzhou, Zhejiang

Weihong Power System Huzhou Co., Ltd. was established in 2006 and is a high-tech chemical and energy product supplier with strong research and development capabilities. The company is engaged in the research and development, production, and sales of new energy and energy storage technology products, committed to providing clean energy solutions for different application fields.

Weihong Power is a subsidiary of Microvast Corporation, with its production base located in Huzhou City, Zhejiang Province. Weihong Power mainly uses fast charging lithium titanate power batteries. At present, the overall production capacity is about 1.5Gwh, and the second phase is under construction with a production capacity of 4Gwh. The main customers are BAIC Foton, CRRC Times, Land Ark, Nanjing Jinlong, Xiamen Jinlong, Zhongtong Bus, Chongqing Hengtong, etc. In the first half of 2015, the output value of Weihong Power Battery business was approximately 450 million yuan.

Reason for being on the list: Weihong Power specializes in fast charging and fast discharging lithium titanate power batteries, targeting the commercial vehicle market, especially in the public transportation and bus sectors, with Weihong Power receiving a considerable amount of goods. But how to break through in the field of passenger cars is something that Weihong Power should consider, after all, the growth potential of new energy vehicles in the future still comes from passenger cars.

NO.10 Giant Lithium Battery - Customized NO.1 Special Lithium Battery Power Supply System

Established in 2002 Headquarters: Dongguan, Guangdong

Dongguan Juda Electronics Co., Ltd. was established in 2002. It is a national high-tech enterprise and special qualification enterprise that integrates independent research and development, production, and sales of lithium-ion battery modules. Since its establishment, the company has always been committed to serving global users of special power sources, power storage sources, industrial power sources, and consumer power sources. After fifteen years of development, it has grown into a leading global provider of customized lithium battery solutions and products.

The company is committed to continuously improving its ability to conduct in-depth customized research and development for users with special environments, special performance, and special requirements. The existing lithium battery customized solutions and products are widely used in special aerospace, missile borne shipborne equipment, special special special, special, high-energy physics, railway infrastructure, public safety, power communication, medical electronics, commercial finance, security communication, transportation logistics, exploration and mapping, photovoltaic energy storage, and 3C consumer electronics, and cooperate with aerospace science and technology, aerospace technology, special, special, China Ordnance Industry Corporation, China Electronics Technology, China Electronics Corporation, China Academy of Sciences, Chinese Academy of Military Sciences, Motorola, Toshiba, Fujitsu, Walta, Foxconn, Lenovo and other fields. We have established comprehensive, long-term, and in-depth strategic partnerships with many respected users such as Changhong, Jiuzhou, Hikvision, and Mindray Medical.

The lithium battery industry is still a growth oriented industry, and some domestic lithium battery manufacturers ranked in the middle have good income and asset growth potential. The top ranked lithium battery manufacturers have performed well in terms of business performance, corporate governance, and brand, and have a large potential for future growth. However, the relative ranking of domestic lithium battery manufacturers is not stable, and the opportunities for latecomers to achieve breakthroughs with faster technological progress are open and equal.

1. Guoxuan High tech, the leader of listed lithium batteries

The production capacity in 2015 was 750 million ampere hours, with a sales revenue of 2.2 billion. It is expected that the production capacity will reach 1.85 billion ampere hours in 2016, including 650 million ampere hours of ternary batteries.

In the 2015 annual report, the revenue from lithium batteries was 2.14 billion yuan, with a gross profit of 1.04 billion yuan. The revenue from power transmission and distribution was 550 million yuan, with a gross profit of 1.5 yuan. The total net profit was 547 million yuan, and the net profit from lithium batteries was 478 million yuan. The net profit margin in 2015 was 21.5%. The net profit for the first quarter reached 25%.

Lithium battery revenue, 2.1 billion in the first half of 2016

In the first half of 2015, the operating revenue of Guoxuan High tech Power Battery was about 750 million yuan.

Comment: Guoxuan's technology is in a leading position and has been shortlisted for national key research projects and industrial intelligence pilot projects. Guoxuan is the only lithium battery enterprise in the entire ecological chain among the compared companies. In addition to lithium batteries, there are also positive electrode materials and separators. The positive electrode materials have been put into production, and the separators were put into production in 2017. Through the whole ecosystem, on the one hand, we can control the overall quality, and on the other hand, we can also control costs and have a stronger ability to resist fluctuations in raw material prices. Guoxuan's strategy is clear. At present, it is in the stage of technological maturity, and capacity expansion is not the primary strategy. Instead, it solidifies the technology, market, production and manufacturing, as well as the upstream and downstream industrial chain ecology, and then expands production on a large scale. Belongs to a very stable business model.

2. Yiwei Lithium Energy

The two technological routes of the company's lithium iron phosphate and ternary lithium batteries are mainly produced by Jingmen in Hubei Province, with a production capacity of about 0.5GWh; At the same time, we will expand the production of ternary cylindrical 18650 batteries in Huizhou and plan to build the second phase of an international first-class automated production line for ternary lithium-ion batteries. The overall construction scale of the second phase is 2.5GWh, and it is expected to be completed in the first half of next year. By the end of next year, the overall production capacity of the company's lithium-ion batteries will be 4.5GWh.

The raw materials for the company's power batteries come from important domestic manufacturers such as Dangsheng Technology, Shanshan Group, Jinhe Group, etc

At present, our main clients include Huatai, Zotye, Nanjing Jinlong, Oupengbach, etc.

Yiwei Lithium Energy has shifted from consumer lithium batteries to power lithium batteries. Currently, its production capacity is relatively low, only 0.5GWh of lithium iron phosphate. The ternary battery is expected to be completed next year, with a large planned production capacity. However, the matching testing between the battery and the car still requires some time, so the actual performance may not be achieved until 2018.

Comment: As a second and third tier player in the field of power batteries, Yiwei Lithium has unclear technological and customer advantages. Currently, its production capacity is very small, and its future expansion scale is huge. However, whether such a nearly tenfold expansion of production capacity can proceed smoothly still needs to be verified.

3. Jianrui Fire (Waterma)

In 2015, Waterma achieved a revenue of 2.173 billion yuan and a net profit of 276 million yuan, with a net profit margin of 12.7%.

Watmar was acquired by Jianrui Fire and approved.

In addition to power batteries, Waterma also has energy storage batteries, focusing on lithium iron phosphate batteries,

The company is now not just a simple battery manufacturing enterprise, but seeks to guide the development of the industry. The company has initiated the establishment of the New Energy Vehicle Innovation Alliance, which includes core material and core component enterprises in the industry chain. In terms of technology, everyone collaborates to innovate, forming a closed loop. Through this action, the company has gained a global understanding of new energy technology and market development direction, from passive development to actively driving industry development. Formed the Linfen model.

Comment: Waterma can be said to be a typical barbaric growth, co building industrial parks with local governments everywhere and producing huge effects. However, this model is not a true market model and has great hidden dangers. It reminds people of the Top model in the past, which was also the establishment of industrial parks in various places. What is the final effect? Whether it is long-lasting or not still needs to be observed.

In the field of technology, Watmar has not become a technological leader and has only developed in the field of iron phosphate curtain technology. In terms of ternary batteries, although it claims to have technological accumulation, it has not yet seen the actual production capacity of related ternary batteries. If the company misses the first mover advantage of ternary batteries, its future development may be limited.

4. Smart energy

Jiangxi Foster was founded in 2009 and mainly produces 18650 ternary lithium batteries. The sales scale of this product ranks first in China. Foster's power battery products have been highly recognized by downstream customers. Currently, Foster is one of Zotye's two core power battery suppliers and the only power battery supplier for Jiangling Motors. At present, the daily production capacity is 1.25 million units. The company is expanding the production of two ternary power battery production lines, with a production capacity of 250000 units per unit. One production line will reach production in July this year, and the other production line will reach production in the first half of 2017. It is expected that by the end of this year, Foster's production capacity will reach 1.5 million units per day (65% for power batteries and 35% for consumer batteries); By the end of 2017, the daily production capacity will reach 1.75 million units (80% for power batteries and 20% for consumer batteries)

In December 2015, Smart Energy completed its wholly-owned acquisition of Jiangxi Foster at a price of 1.2 billion yuan, successfully entering the field of ternary power batteries. Jiangxi Foster has committed to a net profit of no less than 75 million, 95 million, and 130 million from 2015 to 2017, respectively.

Foster had a revenue of 1.076 billion yuan and a net profit of 114 million yuan in 2015, with a net profit margin of 10.6%. From January to March this year, the operating income was 243371445.48 yuan, and the net profit was 44289520.14 yuan. The net profit margin is 18%

The estimated shipment volume of three-way power batteries by Foster from 2016 to 2018 is 1.2 GWh, 2.1 GWh, and 3.3 GWh,

The downstream supporting customers of Far East Foster are well-known passenger cars and logistics vehicles such as Zotye and Shaanxi Tongjia, with extremely strong explosiveness. Based on shipments exceeding 1GWh, the operating revenue is expected to reach 2.5 billion yuan in 2016, including 1.9 billion yuan in revenue from power batteries and PACK, 600 million yuan in revenue from consumer batteries, with power batteries accounting for over 70%. Far East Foster has contributed a profit of up to 200 million yuan, while other businesses in smart energy have made a profit of nearly 400 million yuan, with Far East Foster contributing 33.3%.

Comment: The acquisition of Foster's lithium battery business accounts for less than one-third of the company's overall profit and is not yet the main business of the company. Foster is located in Jiangxi, and its customers are mainly concentrated in Jiangxi, with little nationwide radiation. The production capacity is relatively small, and the technology does not belong to the first tier, so the capacity expansion plan is not aggressive. Belongs to the second tier.

5. Ningde Times - Not yet listed

After its establishment, it only took 4 years to enter the first tier, with rapid development and outstanding achievements, which can be regarded as a miracle, reflecting the barbaric growth of the people of Fujian. Of course, the main reason is that CATL originated from ATL, and ATL's 3C battery technology is at the forefront of domestic technology. Apple, Huawei, Xiaomi, OPPO and other brands of mobile phones use ATL batteries, while DJI's inorganic also uses CATL batteries. So CATL has a profound technical background and accumulation.

In 2015, its power battery accounted for over 10% of the Chinese power lithium battery market, with an annual sales volume of 2.4GWh, second only to Panasonic (5.5GWh) and BYD (3GWh), ranking third in the world. This year, a production capacity of 7.5GWh has been achieved, with lithium iron phosphate and ternary accounting for half each, achieving balanced development.

In 2014, CATL's sales revenue from power batteries was approximately 860 million yuan. In the first half of 2015, the sales revenue from power batteries was approximately 950 million yuan. The online data shows that in 2015, the sales were 5 billion yuan. Zeng Yuqun, the CEO of Ningde, said that it was a $1 billion power battery and a $1.7 billion 3C battery. As it is not a listed company, there is a feeling of running a train with a mouth full. Additionally, data suggests that the net profit in 2015 reached 1 billion.,

Comment: Ningde Times has the highest production capacity, and both technology and Guoxuan have their own strengths, both of which belong to the strongest technology. Due to the fact that Ningde has not yet gone public, there are various exaggerated data on production capacity and sales. But will Ningde expand its production capacity on a large scale in 2016? Will there be a rapid expansion of production capacity that cannot keep up in all aspects, especially in terms of market and technological verification?

The Ningde era began in Ningde, Fujian, and fully embodies the characteristics of the people of Fujian, with a somewhat barbaric growth personality and an excessive pursuit of scale. The internet is filled with data showing that Ningde Times had a sales impact of 20 billion yuan in 2016 and exceeded 5 billion yuan in 2015. In fact, the production capacity and sales of power batteries in 2015 were only slightly larger than those of Guoxuan, and the sales data of 5 billion yuan had a significant amount of moisture. The slogan of the Great Leap Forward, which claimed to hit 20 billion yuan in 2016.

Ningde has not yet been listed, there have been plans to go public.

As the leader of domestic lithium batteries, Ningde's focus this year is on expanding production capacity. It does not have self built positive electrode materials, separators, and other materials to build an ecological chain for lithium batteries. On the positive side, it is seizing the opportunity to expand production capacity and seize opportunities. On the negative side, it is eager for quick success and instant benefits, without solidifying the foundation, and pursuing short-term effects, giving up certain long-term effects. This may also be related to Ningde's eagerness to go public and sell at a good price.

6. Tianjin Lishen - Unlisted

From small mobile phone batteries to large automotive power batteries, Tianjin Lishen Battery Co., Ltd. aims to seize the broad prospects of the new energy vehicle industry through continuous innovation and market share. The expansion project of electric vehicle power batteries under construction, which was put into operation in 2017, can add an annual output value of over 4 billion yuan, driving the development of the new energy vehicle industry chain in this city. The continuous accumulation of power battery technology by Lishen has gained recognition from domestic and foreign enterprises such as Yutong, Jinlong, FAW, and Jianghuai. Sales revenue has shown explosive growth. In 2014, Lishen's power battery sales revenue was 100 million yuan, and in 2015, it jumped to 2 billion yuan. It is expected that this year's sales revenue will reach 4 billion yuan.

The company had a revenue of approximately 4.2 billion yuan and a net profit of over 200 million yuan in 2015. Among them, the operating revenue of power batteries is about 2 billion yuan; The operating income of 3C lithium batteries is about 2.2 billion yuan, with a loss of about 50 million yuan. In 2015, the company's production of power batteries was around 2 billion Wh, with ternary batteries accounting for 30-40%. Almost all ternary batteries were supplied to passenger cars, with almost no buses. In terms of capacity expansion, the company started building a new production capacity of 4 billion Wh of lithium iron phosphate in 2016, and is expected to start production in 2017. In addition, a 3C lithium battery production line has been renovated to increase production capacity by 600 million Wh.

The profit margin of power batteries in 2015 was 12.5%

Comment: Tianjin Lishen's revenue of 2.2 billion yuan from 3C lithium batteries in 2015 resulted in a loss of 50 million yuan, indicating that 3C batteries have entered excessive competition while the market has not grown in sync. As the first tier (Ningde Times, Guoxuan, and Lishen as the first tier), Lishen has been technically shortlisted for national key research projects and is also in the first tier in terms of production capacity. However, Tianjin Lishen has two biggest problems: firstly, the mechanism of state-owned enterprises limits vitality, and secondly, it has not yet gone public, lacking financial support and brand and credibility for going public.

1.1.3 Why is Guoxuan the most worthwhile investment target for lithium batteries

Based on the above data comparison, we can further analyze:

1. Why is Guoxuan's net profit margin much better than other companies.

In 2015, the net profit margin of Guoxuan's power batteries was as high as 21%, reaching 25% in the first quarter, while the net profit margin of Waterma in 2015 was 12.7%, and Foster in 2015 was 10.6%. The net profit margin from January to March this year was 18%. Ningde Times is around 10-15% (with a power battery of 1 billion US dollars, a net profit of 1 billion RMB, and a 3C battery of 1.7 billion US dollars), while Tianjin Lishen's net profit margin in 2015 was 12.5%.

The net profit margin of Guoxuan far exceeds that of its competitors, mainly due to its corporate governance structure, which does not prioritize the pursuit of scale. With long-term technological accumulation, Guoxuan is the only company that has positioned itself in automotive power batteries from the beginning, rather than producing power batteries from 3C batteries. As a listed company, Guoxuan focuses on the long-term development of the enterprise, as well as its short-term and long-term profitability.

Power batteries have significant technological barriers, and forming technological advantages requires strong research and development capabilities and long-term accumulation. Waterma is a typical pursuit of scale, market, and insufficient investment in technological advantages.

2. Can Guoxuan still maintain such a good net profit margin?

At present, in the market, major lithium battery companies are frantically expanding their production capacity, and the production capacity of lithium batteries will eventually be surplus. It is already a structural surplus, that is, power batteries with technological and customer advantages are still out of stock, especially in filling the market gap of Samsung and LG's lithium batteries not being selected in the mandatory catalog. However, the overall profit of the industry will gradually decline, and Guoxuan can maintain the best profit in the industry because Guoxuan's backhand - the self supply of lithium battery materials will soon be effective, and the self production of positive electrode materials and separators can also significantly improve profit margins.

3. Why did Guoxuan fall behind from the first batch of 2012-2013 to the third and fourth place?

Among numerous power lithium-ion battery companies, Guoxuan is the most pure power lithium-ion battery company. Unlike other companies that develop power lithium-ion batteries from 3C lithium-ion batteries, Guoxuan has been committed to power batteries since its establishment. From 2012 to 2013, Guoxuan was the leader in power lithium-ion batteries. However, since 2014, CATL and WATTMA have been vigorously expanding production, which is an unconventional expansion. On the other hand, Guoxuan is also expanding production, but it is a step by step, and the expansion speed is far less fierce than CATL and WATTMA. On the one hand, Ningde Era and Waterma are expanding production, and on the other hand, they are competing for the market at low prices, so Guoxuan continues to maintain good profits, while Ningde Era and Waterma have relatively lower profits. I personally believe that this is the advantage of Guoxuan, which is reflected in the following aspects

a) As a listed company, Guoxuan pays more attention to overall profits. If it also tries to compete for the market at a low price like CATL and Wotma, its profits will immediately plummet and reflect on the stock price. However, Ningde Times and Watmar did not go public and both wanted to sell at a good price. Therefore, expanding their scale and sacrificing profits, they pursued wild growth. As we all know, wild growth may overtake on curves, but the greater probability is that the growth is uncoordinated. Once a storm strikes, it is a fatal disaster. Guoxuan did not sacrifice long-term development for short-term benefits, which is a practice of a century old store and worth long-term investment.

b) While expanding production, Guoxuan has also increased research and development investment, with research and development funds skyrocketing from 45 million in 2014 to 135 million. At the same time, it has increased production investment in positive electrode materials, diaphragms, and other materials to ensure high profits.

c) Wotma was acquired by Jianrui Fire in 2016. Once the process is completed, the financial statements will be consolidated. According to the acquisition agreement, the net profit from 2016 to 2018 will not be less than RMB 403 million, RMB 505 million, and RMB 609 million. We need to start focusing on profits and will no longer expand without restrictions or dump at low prices. The net profit in 2015 was only 274 million yuan, and it is expected to reach 400 million yuan in 2016. This year, due to the impact of the new energy vehicle policy, the overall market is not very good, and Waterma no longer has the capital to compete in the market at a low price. As for Ningde Times, the production capacity has expanded significantly this year. In the current market, which is not very prosperous, it should also face some pressure to digest production capacity. To go public, it needs to have a relatively good profit situation and should be able to restrain the impulse of low price dumping. So both Watmar and Ningde eras will slightly restrain the progress of expanding production. The sales competition of lithium batteries will only unfold among a few large lithium battery companies.

d) The expansion of Guoxuan's production capacity has always been a very strategic plan. For example, in 2016, the main production capacity was the expansion of ternary batteries, which had confirmed customers such as BAIC and JAC. At the same time, Korean lithium batteries were not included in the list. Guoxuan's plan is to expand production on a large scale again in 2018, which means expanding production on a large scale based on the foundation of clarifying all aspects.

4. What is the future pattern of lithium batteries?

The future pattern of power lithium batteries should be that the strong will always be strong and the weak will be eliminated. This is a national strategy, and the country has clearly defined the need to support several power battery enterprises with development potential. The first step is to enforce the lithium battery catalog, so that those that are not included in the catalog will be basically eliminated. The second step is to dynamically adjust the catalog, removing lithium batteries that do not meet specifications from the catalog, so that the production and sales of lithium batteries are more concentrated on the enterprises to be supported.

At present, there are less than ten power battery suppliers that can enter the mainstream automotive supply chain. In the future, the main competition will be within these ten suppliers, and the competition will mainly be in technology, customers, services, and funds. Guoxuan has one of the top competitive advantages in these aspects. Its technology belongs to the state supported enterprises, with stable customers. At the same time, it participates in new energy vehicle companies such as BAIC. Guoxuan has financing advantages for listing and abundant profits to form self generating growth and development.

The future is mainly about the competition between Ningde Era, Guoxuan, and Lishen, and more importantly, the competition between Ningde Era and Guoxuan. Due to mechanism issues, Lishen is likely to fall into the second tier. The first tier is Ningde Era and Guoxuan. Waterma, AVIC, and EVE Lithium Energy will become the second tier companies. There are other third tier teams, such as smart energy, Bike, Wanxiang, etc. Going forward, it may be difficult to enter the mainstream automotive supply chain.

5. Will power batteries repeat the vicious competition of 3C batteries?

In 2016, the scale of power battery expansion was enormous, and the planned capacity expansion of various enterprises was even more astonishing. Will power batteries repeat the vicious competition of 3C batteries? Tianjin Lishen's 3C battery had a revenue of 2.2 billion yuan and a loss of 50 million yuan in 2015, which is a shocking lesson from the past.

I think the profit of power batteries will gradually decline, which is an irreversible trend, but it will not lead to vicious competition like 3C batteries. The reasons are as follows:

1. Power batteries have significant customer and technical barriers, and they need to be matched with the vehicle model. Once the matching is determined, it is unlikely to be replaced, so there is considerable customer stickiness, which is completely different from 3C batteries. Car companies will not solely rely on price as their sole choice factor. For technological barriers, the technology of power batteries is continuously evolving, with a much faster pace than that of 3C batteries. The energy density has increased from 130wh/kg of lithium iron phosphate to 165wh/kg of ternary batteries, and is expected to reach 330wh/kg in 2020. Whoever has micro innovation and breakthroughs in technology such as energy density, charging consistency, and charging and discharging times will have a competitive advantage. This requires strong research and development capabilities, such as the latest graphene cathode. Guoxuan has already started mass production, but due to cost constraints, mass production is not significant.

2. The growth rate of demand for power batteries, if new energy vehicles continue to develop according to the national planning scale, the growth rate of demand for power batteries will almost double every year. Of course, currently, the capacity expansion plan for power batteries still exceeds the growth rate of demand.

3. There will be no more than 10 power battery companies that can enter the mainstream automotive supply chain, forming three tiers, each with 2-4 companies. Therefore, there will be a tacit understanding among those in the same tier, and we should not expand production capacity too quickly, which will lead to a decline in overall profits.

4. Race against the decline in scale and profit, see who runs faster, the overall revenue increase brought by capacity expansion can offset the decline in profit, and see which factor is greater.

5. From the above analysis, it can be seen that the concentration of the power battery market will continue to increase in the future, ultimately not exceeding 5 mainstream manufacturers, while other manufacturers will be in a niche or specific market. And these 5 mainstream power battery companies will participate in international competition, and currently Guoxuan and others have entered the top ten internationally. And these 5 companies will develop and grow, which is also a national strategy. From the perspective of national subsidies and policies, they will develop in this way. For example, the subsidy policy is currently focused on key enterprises by sprinkling pepper before the opening of the market. If this is the future model, then Guoxuan will definitely be one of the five, and its revenue scale will double every year. Taking into account various factors, Guoxuan has the strongest certainty.

Will the development of Guoxuan be smooth sailing?

The recent stock price adjustment of Guoxuan is related to shareholder reduction, but it is also related to the month on month decline in performance. Guoxuan will eventually grow into the first tier of lithium battery enterprises, but the middle road may not be smooth, mainly due to the possibility of being affected during industry reshuffle, especially during overcapacity.

From the perspective of 2016, the planned capacity expansion was significant, but the actual capacity expansion was not significant. Guoxuan expanded from 750 million ampere hours to 1.85 billion ampere hours, while Ningde Times expanded from 3GWh to 7.5Gwh. In fact, Tianjin Lishen's production expansion in 2016 cannot be put into operation yet.

However, 2017 and 2018 will be a time for the lithium battery industry to expand its production capacity on a large scale. If 2016 is a structural surplus, then 2017/2018 may be a comprehensive surplus, and lithium battery companies will face a comprehensive reshuffle. Guoxuan will inevitably be affected at the beginning, such as a decline in profits. However, Guoxuan's technology and material self-sufficiency can make Guoxuan stand invincible, and it can play an advantage in the reshuffle, stabilize in the first camp, and may even rank higher in the first camp.

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