What investment opportunities will the “first share of soft pack battery” favored by Daimler, Geely, Dongfeng, GAC and other well-known automobile enterprises usher in?
As a leading enterprise of soft pack battery in China, Farasis Energy (Gan Zhou) Co.Ltd(688567) flagship product “ternary soft pack power battery” has the characteristics of high energy density, high safety performance, long life and better theoretical performance at low temperature. Thanks to the excellent product quality and the global trend towards “carbon neutrality”, under the current situation that the industry is facing the shortage of high-quality power batteries in China, Farasis Energy (Gan Zhou) Co.Ltd(688567) has been “locked” by many well-known automobile enterprises at home and abroad in the next few years.
Even though we have faced continuous losses in the past few years, the future performance guidelines of Farasis Energy (Gan Zhou) Co.Ltd(688567) performance have been reflected in the draft equity incentive disclosed previously: the income assessment guidelines for 2021-2024 are RMB 3 billion, 7 billion, 14 billion and 20 billion respectively, which means that the annual growth rate in the next four years may reach 106%.
Why are you so optimistic about the future? With the initial achievement of IPO raised investment projects, the company’s production capacity gradually climbed and led to the improvement of performance. The revenue in the third quarter of 2021 increased by more than three times year-on-year, but the situation of short supply is still its “happy trouble”. Some institutions believe that “the biggest factor restricting the company’s performance is the lack of production capacity”. At present, the company has increased investment in production lines such as Zhenjiang, Ganzhou and Wuhu in order to obtain greater production capacity. The current situation of negative profit may open a reversal trend with the passage of time.
“first strand of soft pack battery”
According to the data, power batteries can be divided into ternary material batteries, lithium iron phosphate batteries, lithium manganate batteries, lithium cobalt oxide batteries, etc; According to the packaging mode and shape, it can be divided into square battery, soft pack battery and cylindrical battery. Ternary soft pack power battery is favored by Chinese foreign car enterprises because of its advantages such as high energy density, high safety performance and long life. In 2020, among the top ten new energy passenger vehicles in the world, 6 are equipped with soft pack batteries, and 15 of the top 20 in Europe are equipped with soft pack technology lines, which also makes it an important development direction of power battery technology line.
According to China Merchants Securities Co.Ltd(600999) , the global installed capacity of soft pack battery is expected to reach 650gwh in 2025, and Farasis Energy (Gan Zhou) Co.Ltd(688567) is the leading enterprise in China for four consecutive years. Its products mainly include ternary soft pack power battery cells, modules and battery packs. The company, formerly known as American Funeng, was founded in Silicon Valley, California by Dr. Wang Xuan in 2002. It has been deeply engaged in the field of lithium battery for more than 20 years, and first established the research and development direction of ternary soft pack power battery structure.
Farasis Energy (Gan Zhou) Co.Ltd(688567) in 2020, it was listed on the science and Innovation Board of Shanghai Stock Exchange and raised 3.436 billion yuan to build the phase III project of the annual 8gwh lithium-ion power battery project in Zhenjiang, which is mainly to solve the problem of “insufficient high-end capacity and excess low-end capacity” and become the “first share of soft packed lithium-ion power battery”. With the promotion of the raised investment project, recently, Farasis Energy (Gan Zhou) Co.Ltd(688567) said on the interactive platform that the company sent samples of semi-solid batteries to the vehicle factory customers and received good feedback. The products produced by Zhenjiang factory for Mercedes Benz are high nickel ternary cells with an energy density of 285wh / kg, and the production line can be suitable for the production of the next generation of products with an energy density of 330wh / kg after slight adjustment. In addition, it also said that the company will build a similar 285wh / kg production line in the future, and the time from the ramp up of production capacity to the target value will be greatly reduced, and the initial results of IPO investment projects have been achieved.
\u3000\u3000 “Looking back on 2021, we have made great achievements in market expansion, order delivery, product research and development, talent attraction and corporate governance. The company has achieved rapid growth in sales and successive implementation of new projects; completed the ramp up of production capacity and ensured the expected delivery of customers; developed a new 330wh / kg battery technology and won various awards outside China; and implemented equity Incentive plan to arouse the enthusiasm of employees… “Chairman Wang Xuan said in his new year’s message.
customer structure shift upgrade, endorsed by world-famous car enterprises
With the gradual prominence of product advantages, the company has increasingly received the favor of well-known automobile enterprises, and the customer structure has successfully realized gear shifting and upgrading. At present, the main customers include Daimler, Geely, Dongfeng, GAC, BAIC, Jiangling, Wuling and other companies, showing the characteristics of diversification and high-end.
Daimler, for example, headquartered in Stuttgart, Germany, is the world’s largest manufacturer of commercial vehicles, the world’s largest manufacturer of luxury cars and the second largest manufacturer of trucks. In November 2018, Farasis Energy (Gan Zhou) Co.Ltd(688567) defeated several global first-line battery suppliers and signed a power battery supply contract with Daimler in the scale of 10 billion euros from 2021 to 2027. At that time, it was agreed that the total scale of power battery was 170 GWH. After signing the “big order”, Daimler invested RMB 900 million in Farasis Energy (Gan Zhou) Co.Ltd(688567) and obtained about 3% shares of Farasis Energy (Gan Zhou) Co.Ltd(688567) on the occasion of listing on the science and innovation board, ranking the fifth largest shareholder of the company. Markus Shafer, member of the board of directors and chief operating officer of Mercedes Benz, also served as the supervisor of Farasis Energy (Gan Zhou) Co.Ltd(688567) listed company in July 2021, strengthening the strategic partnership between the two.
The company also established a joint venture with Geely technology group to jointly build production capacity. According to the agreement, Farasis Energy (Gan Zhou) Co.Ltd(688567) and the newly established joint venture have a total production capacity of no less than 120gwh, and 12gwh has been put into operation in Ganzhou in 2021.
In addition, it was reported from the Guangzhou auto show, which opened on November 19, 2021, that Landu dreamer, a large luxury electric MPV owned by Dongfeng, adopts Farasis Energy (Gan Zhou) Co.Ltd(688567) 590 battery module, and the energy density of the battery cell exceeds 275wh / kg; In addition, the two all electric vehicles EQA and EQB of Mercedes Benz also adopt Farasis Energy (Gan Zhou) Co.Ltd(688567) ternary battery products. Insiders believe that in the field of large cars and luxury cars, the advantages of ternary batteries are very obvious. Whether MPV or pickup truck, as well as large high-end cars such as Mercedes Benz EQS series, they are more suitable for ternary lithium battery products with high energy density.
Thanks to the strong cooperation with many well-known automobile enterprises, Farasis Energy (Gan Zhou) Co.Ltd(688567) 2021 product shipments increased significantly. According to the latest data of China automotive power battery industry innovation alliance, the cumulative installed capacity of Farasis Energy (Gan Zhou) Co.Ltd(688567) China Shipbuilding Industry Group Power Co.Ltd(600482) battery reached 2.45gwh in 2021, a significant increase of nearly 2 times compared with 0.85gwh in the same period last year, showing a good development situation of continuous expansion of the company’s business scale and rapid improvement of the industry prosperity.
the prospect is promising after the release of production capacity, and equity incentive guides high growth
According to the announcement, Farasis Energy (Gan Zhou) Co.Ltd(688567) 2021 achieved an operating revenue of 1.965 billion yuan in the first three quarters, a year-on-year increase of 252.14%; Among them, the revenue in the third quarter exceeded that in the first half of the year, reaching 1.088 billion yuan, a year-on-year increase of nearly three times.
For the significant increase in this figure, Farasis Energy (Gan Zhou) Co.Ltd(688567) said that the main reason was the development of new model projects for customers such as Guangzhou Automobile Group Co.Ltd(601238) and the gradual formation of sales revenue of Daimler customers.
Although the profit is still negative, the performance of Farasis Energy (Gan Zhou) Co.Ltd(688567) has the potential to explode, and the current loss may be the darkness before dawn. “At present, the biggest factor restricting the company’s performance is the lack of production capacity”, industry insiders said. Therefore, the improvement of production capacity is very important for Farasis Energy (Gan Zhou) Co.Ltd(688567) future performance take-off.
At present, the company has 5gwh capacity in Ganzhou and 8gwh capacity for Daimler in Zhenjiang. Phase I is in operation, phase II is about to be put into operation, and phase III is expected to be put into operation by the end of 2022. In addition, the company also plans to raise no more than 5.2 billion yuan for high-performance power lithium battery projects and science and technology reserve funds. Industry insiders believe that if the fixed increase is successfully implemented, it will be conducive to the improvement of the company’s high-end production capacity, enhance the sustainable operation ability and strengthen the company’s competitive advantage in the high-end field of power batteries.
The company officially began to supply European models of Daimler eva2 platform in batch in Q2 last year. Some institutions expect that the shipment will increase exponentially with the continuous expansion of Zhenjiang production capacity, so 21q3 is a key turning point after the introduction of Daimler project. Revenue is expected to enter the channel of rapid growth. The company has passed the painful period of early customer introduction and entered the harvest season of batch shipment.
However, it is understood that the company needs long-distance transportation to supply Daimler’s overseas capacity, and the revenue recognition is usually more than 2 months. Therefore, Western Securities Co.Ltd(002673) said that the rapid release of capacity in the third quarter will effectively support the revenue recognition in the fourth quarter and the first quarter of the next year. Therefore, some institutions believe that 2022 is the harvest period of concentrated and large-scale customers of the company, and the company’s performance is expected to increase by an order of magnitude driven by the superposition of capacity expansion and sharp increase in demand, with high performance flexibility.
In June 2021, Farasis Energy (Gan Zhou) Co.Ltd(688567) issued the draft of equity incentive, giving the income assessment guidelines for 2021-2024 to be 3, 7, 14 and 20 billion yuan respectively, and the growth rates for 22-24 years were 133%, 100% and 43% respectively. The incentive plan covers 569 people, involving management and many R & D personnel.
The incentive plan means that the annual growth rate in the next four years needs to reach 106%, which guides the rapid growth of the company’s revenue in the future. In addition, 13 executives and core technicians of the company obtained 25.45% of the total number of restricted shares; There are 556 other people who need incentives, accounting for 67.06%. At the same time, the number of shares granted by the incentive plan is linked to employee performance, and about 10% of people can’t get the incentive. Therefore, Minsheng Securities believes that the plan can reverse the incentive to retain the core team and have a metabolic effect on the team.
