The Zhitong Finance App learned that Dongwu Securities released a research report saying that the profit of the 24H1 lithium battery industry is expected to bottom out, production capacity clearance will accelerate, the supply and demand pattern will improve in 25 years, and the sector will regain growth. The main industry is still promoting the battery industry first, recommending Ningde Era (300750.SZ), Everweft Lithium Energy (300014.SZ), etc.; optimistic about Kodali (002852.SZ), Tianci Materials (002709.SZ), etc.; and optimistic about new technologies such as high-voltage fast charging, composite fluid collection direction, target China Fuse Electric (301031.SZ) (follow), Vmax (688612.SH), etc.; it is also recommended to focus on the lithium carbonate sector where the price is about to bottom, the standard Tianqi Lithium Industry (006.6SZ)), Ganfeng Lithium (002460 .SZ) etc.

Global electric vehicle sales were weak in January, in line with expectations, and are expected to recover in March. Domestic electric vehicle sales in January were 729,000 units, +79%/-39% month-on-month, with a penetration rate of +5.2/-7.8pct. Among them, the plug-in share increased sharply to 41%. Demand was weak after the end of the year, short-term electric vehicle pricing was aggressive. Sales are expected to resume in March-April, and a 25% increase of about 11.82 million units in '24. Nine mainstream European countries sold 138,000 vehicles in January, +23%/-42% month-on-month, penetration rate 18.5%, and +1.7/-9.1 pct. The annual growth rate is expected to be 8-10% to close to 3.2 million vehicles. The market is already fully anticipated. The US sold 116,000 vehicles in January, +17%/-20% month-on-month, with a penetration rate of 10.7%, and +1.4/+0.7 pct. The 24-year growth rate forecast has been lowered to 25%, with sales volume of 1.84 million units. Overall, global sales of electric vehicles are expected to maintain 21% growth of more than 16 million units in 24 years.

Looking at the production side of the lithium battery industry chain, during the low season in January, the cycle fell 10%, fell another 20% in February, and recovered in March. The overall Q1 production schedule is expected to drop 20% month-on-month and increase 10-20% year over year, in line with expectations. Due to the sharp drop in lithium carbonate prices in 23Q4, the industrial chain went out of storage. The industry began to cut production in November, and mainstream companies' Q4 production schedules fell 0-20% month-on-month. During the low season in January-February, production schedules were reduced by 10% month-on-month. Part of the mitigation benefited from pre-Spring Festival preparations. Production schedules remained flat month-on-month. The February Spring Festival affected production for about 7 days, and production schedules generally fell 20%. It is expected to resume in March. Overall, production schedules for Q1 fell 20% month-on-month, up 10-20% year on year. Currently, mainstream companies' 24-year shipment growth expectations have generally been adjusted to 20-30%, and the market has fully anticipated it.

Prices in the Q1 industrial chain fell further, the domestic market went into a state of loss, and overseas markets still had significant profit premiums. In February '24, the price of upstream lithium carbonate was 9.5-100,000 yuan/ton. Due to weak demand in Q1 and the continuous release of new production capacity, Dongwu Securities expects that there is still room for price decline. If the cash cost falls to high production capacity of 70,000/ton, it will accelerate capacity clearance; in terms of midstream profits, some links such as electrolytes, diaphragms, anodes, ternary yuan and lithium iron cathodes fed back 24Q1 further price cuts, but it is already close to the bottom. It is expected that there will be limited room for subsequent profit decline and will further clear production capacity in the Q1 battery cycle; Prices in the domestic market have dropped significantly, and the price of some power iron-lithium batteries has fallen below 0.4 Yuan/wh, while the overseas linkage+annual price reduction pricing method has stable overall prices and obvious profit differences. Overseas customers in the Ningde era accounted for 40%, and the average price and single wh profit were far better than peers.

Investment advice:

It is expected that the profit of the 24H1 industry will bottom out, the clearance of production capacity will accelerate, the supply and demand pattern will improve in 25 years, and the sector will regain growth. The main industry still promotes the battery sector. We recommend Ningde Era (300750.SZ), Everweft Lithium Energy (300014.SZ), and BYD (002594.SZ).

In terms of materials, I am optimistic about Kodali (002852.SZ), Tianci Materials (002709.SZ), Putailai (603659.SH), Enjie (002812.SZ), Xingyuan Materials (300568.SZ), Xinzhoubang (300037.SZ), Hunan Yuneng (301358.SZ), DeFang Nano (300769.SZ), Rongbai Technology (688005.SH), Dangsheng Technology (300073.SZ), Huayou Cobalt (603799.SH), Zhongwei (300919) .SZ) etc.

Also, I am optimistic about the direction of new technologies such as high pressure fast charging and composite fluid collection, targeting China Fusion Electric (301031.SZ) (follow), Vmax (688612.SH), Mannst (301325.SZ), Sinde New Materials (301349.SZ), Tiannai Technology (688116.SH), etc.

At the same time, it is recommended to focus on the lithium carbonate sector where prices are about to bottom out, such as Tianqi Lithium (002466.SZ), Ganfeng Lithium (002460.SZ), Yongxing Materials (002756.SZ), China Mining Resources (002738.SZ), and Shengxin Lithium Energy (002240.SZ).

Risk warning: Price competition exceeds market expectations, raw material prices are unstable, affecting profit margins, declining investment growth, and the impact of the epidemic.