The Zhitong Finance App learned that Dongwu Securities released a research report saying that the boom in electric vehicles was maintained, Q2 production schedule increased 30% + month-on-month, annual demand increased 25-30%, “trade-in” policies or stimulated demand exceeded expectations, and capacity utilization continued to increase. The industry's capacity utilization rate is expected to increase to 80% + in 25 years. Profit bottomed out in Q1, prices in Q2 were stable, and prices of some low-priced orders recovered. Profit increased slightly month-on-month, and reversed definitively in 25 years. Currently, there are significant marginal changes in electric vehicles. Lithium battery leaders continue to be promoted, with Ningde Era (300750.SZ), Kodaly (002850.SZ), Hunan Yuneng (301358.SZ), etc.

The main views of Dongwu Securities are as follows:

The implementation of the policy or the stimulation of demand exceeded expectations. The industry schedule remained high in April-May, and it is optimistic that demand will continue to improve.

Automobile “trade-in” was launched in April, and sales momentum began to be reflected in May. Ideally, when orders from car companies resume clearly, in an optimistic situation, trade-in will drive sales of 1 million vehicles +, and corresponding battery demand will drive 60 GWh, and the annual sales growth rate is expected to exceed 25%. On the production side, in April, due to a slight decline in automobile demand, it remained flat in May, but due to the recovery of orders from car companies and improving demand for energy storage after the implementation of the policy, it is expected that there will be a slight increase month-on-month in June. The Q2 production schedule is expected to increase 30% + month-on-month, and demand for the whole year will increase 25-30%, and the industry is still in a state of low inventory.

The inflection point of production capacity utilization is clear. Some of the leading companies have reached full production, the inflection point of supply and demand is ahead, and a definite profit inflection point in 25 years.

Due to limited financing and bottoming profits, the actual expansion of production in the industry fell short of expectations. In April, the utilization rate of leading battery production capacity increased to 80%, and Yuneng, Shotai, and Zhongke almost fully produced, and the utilization rate of second-tier and third-tier production capacity recovered to 60-70%, while prosperity improved and electric vehicle sales still increased 20% year-on-year in 24, and supply and demand were inflection points or ahead. On the profit side, profits in the vast majority of materials in Q1 bottomed out. Q2 prices were stable and prices for some low price orders recovered. Combined with an increase in capacity utilization, Q2 profits are expected to increase slightly month-on-month, with a definitive reversal in 25 years.

The US IRA assessment was relaxed, and overseas demand supported growth for 25 years and beyond, benefiting China's supply chain.

The IRA has relaxed the localization assessment of lithium battery materials, and the cost performance advantage of the Chinese supply chain has been highlighted, which can help reduce the cost of electric vehicles in North America and increase the electrification rate. Overseas car companies' new platforms will be launched in 25-26. European carbon emissions assessments will become stricter, and sales growth will return to 20-30% growth in 25-26, supporting long-term compound 20% + growth in lithium battery demand.

Risk warning:

Price competition exceeds market expectations, raw material prices fluctuate, and investment growth declines.