Events
Since the state clearly put forward the “double carbon” goal, the power and new energy sector has been popular in the market for a long time, and the overall market value has increased significantly in the past year. However, with the arrival of the new year of 2022, the new energy sector has retreated to some extent in the past five trading days, and the market view has been differentiated with the overestimation of the new energy sector. For the recent fluctuations in the new energy sector, we make the following comments.
Comments
\u3000\u30001. At the beginning of the new year, the style of capital positions changed.
In the new round of investment year, with the changes of internal and external markets, the capital is expected to adjust in 2022. The main reason is that the external monetary policy gradually turns to hawks, while the internal monetary policy expectation remains unchanged. The fund position style tilted from the high growth sector in the past year to the undervalued sector with strong defensive attribute. The signal of steady economic growth in the new year has accelerated the trend of capital flow to the traditional infrastructure field. At the same time, some funds chose to cash in their earnings during this period, which resulted in this round of decline.
\u3000\u30002. Higher valuation and capital redistribution.
New energy is undoubtedly the most eye-catching sector in last year. With the rise of share price, the valuation of new energy sector also rises. According to the national securities new energy index, from December 31, 2020 to December 31, 2021, the overall pe-ttm of the index rose from 43.14 to 58.70, an increase of 36.07% in 2021, while the annual increase of the index was 38.93%, which means that the overall profitability of the index’s constituent stocks in 2021 was not significantly improved compared with the previous year, and the rise of the share price was basically caused by pushing up the valuation. In contrast, the semiconductor and Baijiu, which are the hot sectors, have different performances. Last year, the semiconductor index PE-TTM level decreased by 26.84%, while the index increased by 35.93%. While the Baijiu sector, in the overall index rose 13.01%, PE-TTM level last year also dropped by 18.64% throughout the year, partially digested Baijiu sector for several consecutive years of strong gains. The growth of profitability is weak. There is a “ceiling” to push up the stock price only by valuation adjustment. In the new year, the market will wait and see whether the profits of the new energy sector can digest its valuation.
\u3000\u30003. High prices of new energy raw materials squeeze downstream profit margins.
Although there are many opportunities in the field of new energy, the game between upstream and downstream industrial chains is becoming increasingly fierce. Monocrystalline silicon and lithium iron phosphate are representative raw materials in photovoltaic power generation and lithium battery new energy respectively. Both prices rose sharply in 2021, up 100% and 227.27% respectively. In particular, lithium iron phosphate ushered in a new round of increase at the end of 2021. Lithium battery raw materials are limited by mineral resources and production capacity, and the supply cannot be greatly increased in a short time. Although silicon is rich in the earth’s crust, up to 25%, it appears in the form of oxide. The preparation of monocrystalline silicon itself is a high energy consuming industry, which is regulated by the dual control policy of energy consumption. Therefore, the supply-demand relationship between the two is still tight in the future, and the continuous rise of raw materials has also squeezed the profits of middle and downstream manufacturers.
\u3000\u30004. The national subsidy has retreated, and the profits of new energy vehicle enterprises are under pressure.
The direct trigger for this round of new energy sector correction is undoubtedly the notice of the development and Reform Commission of the Ministry of finance, the Ministry of industry and information technology, the Ministry of science and technology on the financial subsidy policy for the promotion and application of new energy vehicles in 2022 (hereinafter referred to as the notice) issued by the Ministry of Finance and other four ministries and commissions at the beginning of the year. According to the notice, the subsidy for new energy vehicles in 2022 will decline by 30% compared with that in 2021, and the subsidy policy will be terminated after the end of 2022. The decline of subsidies will have a direct negative impact on the net profit of auto enterprises. Some auto enterprises have raised the price of their products in response to the impact. The price increase has partially reduced the competitiveness of new energy vehicles in the process of replacing fuel vehicles. The future software services and other businesses of new energy vehicle enterprises are highly dependent on the number of platforms. Once the volume is blocked, the future development of this part of business will have an adverse impact. Considering that the major new energy vehicle enterprises still have a large backlog of orders on hand and can enjoy the state subsidy treatment last year, the decline of the state subsidy has a limited impact on the vehicle enterprises in the short term. However, with the continuation of this process, especially the complete elimination of subsidies next year, it is necessary for the new energy vehicle enterprises to adjust their marketing, production and other strategies to adapt to the market-oriented competition with sole responsibility for their own profits and losses.
\u3000\u30005. Track differentiation, select the best from the best in the market.
We believe that new energy is still a high-quality track, but with the overall market value of the sector pushing up, the track is gradually divided. We need to identify high-quality enterprises. Over the past year, companies in the new energy sector have been hot, but under the expectation of high growth, they still have to return to the judgment of market competition pattern and their own ability. Some segments are still expected to continue to enjoy dividends, while others face difficulties in keeping up with profit growth. At the beginning of the new year, the market is bound to re-examine the overall new energy sector and select the best from the best.
In the high-quality track, we are optimistic about lithium, cobalt, nickel, electrolytic aluminum and other sector enterprises. As mentioned above, the most downstream auto enterprises in the industry are facing the profit pressure of the decline of national subsidy, while the battery electrolyte manufacturers in the middle reaches are directly facing the high cost of raw materials. As the most upstream of the industry, lithium, cobalt, nickel and other new energy related metal minerals have their own minerals. Enterprises do not have the pressure of raw materials, while electrolytic aluminum enterprises have rich and cheap raw materials. These enterprises directly benefit from the rising prices of raw materials in the new energy sector. The average development cycle of metal minerals is about 17 years. Even if we increase investment now, we can only try to expand production capacity from existing exploration resources. In the development process, it is often limited by the local laws of mineral resources. The development investment in warrant handling and mineral infrastructure construction takes a long time, and the capacity expansion is still limited in the short term, which is difficult to keep up with the rapidly growing downstream demand. As a high energy consuming enterprise, electrolytic aluminum is regulated by the “dual control of energy consumption” policy, and there is no room for capacity improvement. Considering that Tesla and other auto enterprises use aluminum as the structural part material of the whole vehicle, the demand side grows strongly. These enterprises are expected to obtain sustained high price orders and excess profits in the tight supply and demand market pattern.
According to media reports, musk recently signed a nickel supply agreement with Talon metals in the United States for the first time. Over the past year, Tesla has increased nickel suppliers several times. Previously, Tesla signed nickel supply agreements with BHP Billiton, Vale, New Caledonia Goro and Prony resources. Considering the position of nickel in the future solid-state battery technology path, Tesla‘s recent move can be described as a rainy day, striving to minimize its own cost pressure in the trend of high raw material prices. In recent years, listed companies in the Chinese market have actively distributed minerals, including Ganfeng Lithium Co.Ltd(002460) upstream mining enterprises, Contemporary Amperex Technology Co.Limited(300750) midstream battery and electrolyte companies, and even Great Wall Motor Company Limited(601633) terminal vehicle enterprises. The whole industrial chain has bought upstream minerals one after another, highlighting the scarcity attribute of minerals themselves.
Core view
With the rapid production and marketing of new energy vehicles in the three major passenger car markets in China, the United States and Europe and the gradual replacement of traditional fuel vehicles, the supply gap of new energy base metals such as lithium, cobalt, nickel and electrolytic aluminum will further expand. The supply of upstream raw materials determines the upper capacity limit of downstream manufacturers to a considerable extent, thus affecting the market share pattern of battery and electric vehicle enterprises. With the whole industrial chain competing for mineral resources, 2022 will be an important investment year for the new energy raw material industry. The rise in demand and commodity prices may continue to bring industry opportunities with both volume and price to the sector, thus making it more attractive to capital market funds. The short-term correction fluctuation of new energy does not affect the long-term development trend of this field, but urges investors to carefully select the high-quality track. We believe that the metal mineral sector related to the new energy sector will be an important focus of investment in 2022.
Risk tips
Changes in overseas mineral investment environment, higher than expected investment in new production capacity, lower than expected downstream demand, etc.
