Ningde Earns Staggering 36B Yuan

What do people think of CATL's Q3 report?

According to the financial report, the operating income was 259 billion yuan, a year-on-year decrease of 12.09%; net profit was 36 billion yuan, a year-on-year increase of 15.59%. Looking at just the third quarter, the operating income was 92.3 billion yuan, a year-on-year decrease of 12%, and the net profit was 13.136 billion yuan, a year-on-year increase of 26%.

That is to say, CATL earns 146 million yuan per day!

There are a few points to add about this operating performance.

Firstly, the decline in operating income is mainly due to the decline in lithium battery prices, not a decline in sales volume. In the third quarter of this year, CATL's battery sales volume was about 125GWh, a year-on-year increase of 27%, which is a significant increase both year-on-year and quarter-on-quarter. According to data released by SNE Research, in the first 8 months of this year, CATL's power battery installation volume was 189.2GWg, a year-on-year increase of 27.2%, with a global market share of 37.1%, an increase of about 1.6 percentage points compared to the same period in 2023.

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Next is the net profit, compared with peers, CATL's finances are more conservative. In the third quarter of this year, CATL provided for 4.74 billion yuan of lithium carbonate impairment losses, which is 3.37 times that of the second quarter and 7.25 times that of the same period last year. That is to say, if this part is added back, CATL's actual operating profit is close to 17 billion yuan.

To be frank, after the disclosure of this financial report, many previous market doubts about CATL can be put to rest.

For example, the supply of lithium batteries is excessive, price wars are intensifying, and CATL's profitability will deteriorate; for example, car companies are developing their own batteries, and CATL's batteries are not selling; for example, BYD's rise will seriously erode CATL's market share; and for example, as Sino-US conflicts intensify, CATL's overseas market will be severely impacted, and so on.

Many people may not have noticed that against the backdrop of declining lithium battery prices, CATL's gross margin in the third quarter reached 31.17%. What does this mean? It means that although lithium battery prices have declined, it does not necessarily mean that profit margins will decline; it means that CATL has not participated in the "price war". It should be noted that given that the gross margins of peers are generally below 20% or even 15%, if CATL reduces prices to grab market share, then the gross margins of peers are very likely to be extremely low, even single digits or lower.

Let's focus on inventory.According to financial reports, in the third quarter of this year, Contemporary Amperex Technology Co., Limited (CATL) had inventory worth 55.2 billion yuan, maintaining a quarter-on-quarter increase. It is important to note that this is not due to unsold goods forcing an increase in inventory, but rather a result of the company's proactive stockpiling in response to the increasingly strong demand from downstream markets. In fact, CATL's production capacity utilization rate in the third quarter has approached saturation, signaling that the era of oversupply in the lithium battery industry is fading.

In fact, one aspect has been overlooked.

Although many lithium battery companies have disclosed expansion plans of hundreds of GWh, they have not truly been implemented. Take SVOLT Energy Technology as an example. At the end of 2021, SVOLT announced a capacity upgrade strategy, planning to challenge a production target of 600 GWh by 2025, three times the original plan. However, according to data from the Power Battery Industry Innovation Alliance, in the first eight months of this year, SVOLT's installed capacity was 9.97 GWh, with a market share of 2.9%, ranking seventh in China and failing to enter the global top ten.

So, do people still believe that the 600 GWh production target can be achieved? In a word, planned capacity is not the same as actual installed capacity.

Some may ask, although CATL's performance is good, past performance does not guarantee the future. Against the backdrop of new energy vehicle (NEV) penetration rates exceeding 50%, is there still room for growth for CATL?

First, the penetration rate of NEVs exceeds 50%, but a significant part consists of hybrid and low-energy pure electric models. Second, there is room for battery structure upgrades, with high-quality products replacing outdated ones. For instance, the proportion of Shenxing+Qilin batteries is 3-4 this year and is expected to increase to 7-8 next year. Third, globally, the penetration rate of NEVs is only in the single digits. Fourth, the energy storage market can still maintain a 50% growth rate.

Not considering new businesses, just focusing on the power battery and energy storage battery markets, the current market is far from being saturated!

Let's talk about the most concerned European and American markets.

In the past, we have been focusing on the European and American markets, but little did we know that the prospects of other markets are even broader. Take the BRICS countries as an example; currently, the global GDP share of BRICS countries has exceeded that of the G7 countries, and the gap is expected to further widen, with more than 30 countries wanting to join the BRICS.

What does this mean? Developing countries, represented by the BRICS, have both population and market potential, which is far greater than the European and American markets that are on the brink of economic recession.Put it this way, it's better to enter the European and American markets, but if we can't, the sky won't fall. Relying on BRICS countries and the "Belt and Road" countries, CATL's global market can also achieve growth, which is the so-called "surrounding the cities from the countryside" strategy.

As for the performance of peers, looking horizontally, in the first eight months of this year, the market share of LG Energy, SK On, and Samsung SDI has declined year-on-year, especially Panasonic, which is the only company in the top ten with negative growth in shipments. Considering that Northvolt, the "European battery king," is mired in factory closures and layoffs, they are all on a downward trend, and there is not a single one that can compete globally.

In a word, the global power battery industry depends on China; the Chinese power battery industry depends on CATL!