The Zhitong Finance App learned that Pacific Securities released a research report saying that after reviewing the two cycles experienced by the industry in 2012-2023, the bank found that the bottom of the industry often experienced fierce price wars, profit difficulties for most electrolyte companies, drastic reduction in corporate financing and capital expenditure, and stagnation in new production capacity investment. The bank believes that the electrolyte industry is currently in the bottom range: 1) leading companies carried out large amounts of financing and capital expenditure from 2021 to 2023, but Q3 capital expenditure in 2023 has shown a downward trend; 2) Electrolyte companies expanded production capacity on a large scale in 2021-2023, and compared to the previous round of expansion, the bank expects the industry to clear a larger scale and more intense competition.

Beneficial targets: Tianci Materials (002709.SZ), Xinzhoubang (300037.SZ), polyfluoride (002407.SZ), etc.

Pacific Securities's views are as follows:

The electrolyte industry is highly cyclical, the profit level is flexible, and the profit bottom is leading

Compared with other aspects, the bank believes that electrolytes have the following characteristics: 1) the construction cycle is short; 2) the material cost is relatively high; 3) the price adjustment cycle is short; 4) the electrolyte chain has less inventory. Therefore, in a period when the industry is booming, electrolyte prices and profits can easily rise rapidly, and new entrants increase; when industry sentiment declines, the electrolyte competition pattern deteriorates rapidly, prices are adjusted rapidly, and the industry clears out faster, and it can take the lead in bottoming out and reversing.

The electrolyte industry is already in the bottom range. 2024 is the time for a new round of layout

Reviewing the two cycles experienced by the industry in 2012-2023, the bank found that the bottom of the industry often experienced fierce price wars, profit difficulties for most electrolyte companies, drastic reduction in corporate financing and capital expenditure, and stagnation in new production capacity investment. The bank believes that the industry is currently in the bottom range: 1) leading companies carried out large amounts of financing and capital expenditure from 2021 to 2023, but Q3 capital expenditure in 2023 has shown a downward trend; 2) Electrolyte companies expanded production capacity on a large scale in 2021-2023, and compared to the previous round of expansion, the bank expects the industry to clear a larger scale and more intense competition.

The bank believes that 2024 is preparing an important bottom-up opportunity. It is recommended to focus on forward-looking indicators such as electric vehicle sales, changes in industry production capacity, and simultaneous indicators such as electrolyte and raw material prices:

1) The bank expects the growth rate of global electric vehicle sales to slow in 2024, and a negative year-on-year increase in monthly production/sales may be a sign of bottoming out and about to reverse (for example, electric vehicle production in Q3 2019 began to decline year on year, and stock prices began to reverse); 4) The bank estimates that electrolyte prices and stock prices have reached the historical bottom range. It is expected that the bottom price of electrolyte may approach or fall below the industry cost line. The price is expected to rise as downstream demand grows, and the stock price is expected to respond early.

Optimistic about leading companies growing through cycles:

1) Electrolyte prices and profits will fall to the bottom in 2024, and leading companies are expected to maintain profits with cost advantages.

2) High-cost companies in the industry may be forced to stop production, while leading companies still operate sustainably and stabilize their share.

3) When the industry reverses, the share and profits of leading companies are expected to increase again. For example, Tianci Materials binds leading customers (leading customers are also expected to cross the cycle and increase share), and once again lays out upstream resources during the bottom period.

4) New technology and overseas markets may change the competitive landscape of the industry, and we are optimistic about leading companies that will take the lead in building overseas factories and have accumulated a lot of new technology.