Power Equipment Industry Review Report: Overall Earnings Improve Significantly, IRA Accelerates North American Layout

Investment Highlights

LG New Energy: 2022Q3 revenue of about 38.85 billion yuan (Korean Won exchange rate of 196.84:1, the same below), +90%/+51% YoY; double impact of price linkage + sales growth; 22Q3 operating profit of 2.65 billion yuan, operating margin of 2.5%, -3.8pct/+0.7pct YoY, metal price linkage mechanism in the quarter showed results, thickening However, the depreciation of the Korean won at the end of the quarter brought non-operating foreign exchange losses, and the growth rate of net profit was less than the growth rate of operating profit. In terms of capacity, the company expects to reach 195GWh by the end of 22, of which 114GWh/68GWh/13GWh in Asia/Europe/North America respectively; 522GWh by the end of 25, of which 145GWh with GM in Michigan, Ohio and Tennessee, 40GWh with Honda in Ohio, and 522GWh with Stellantis. Stellantis in Ontario with a planned capacity of 45GWh, the joint venture project increases a total of 230GWh; support the high growth of the North American market.

Three Stars SDI: Q3 2022 revenue of RMB27.27 billion, +56.1%/+13.2% YoY; operating profit of RMB2.87 billion, +51.5%/+31.9% YoY; net profit of RMB3.24 billion, +51.8%/+56.0% YoY, profitability significantly improved, mainly driven by sales of high value-added products. Earnings were mainly driven by the expansion of sales of high value-added products. The 4680 battery developed by the company is scheduled to be designed and put into mass production next year. In addition to the 4680, the company is also developing a variety of 46 series batteries with various heights. In terms of production capacity, the company plans to make additional investments in Europe to expand the production capacity of its Hungarian plant; in the U.S., the Michigan plant will add a battery pack production line and the Indiana plant will start work earlier to meet the subsidy policy of the Inflation Reduction Act.

SKI: Battery volume and profit performance is bright, diaphragm 23 years to slow down capacity construction. Revenue of battery segment in Q3 2022 was RMB11.147 billion, +169%/+70% YoY; operating profit was RMB684 million, -36%/+59% YoY; operating margin was -6%, +6pct/+19pct YoY. revenue growth was mainly due to stable start-up of new plants in US and Europe and higher raw material prices; operating loss decreased due to The decrease in operating loss is due to the transfer of the cost of raw material price increase. We have started the local supply chain layout and plan to build North American cathode plants with Betray and Ford. Diaphragm capacity plan revised downward by 210 million sqm to 1.87 billion sqm in 2023, unchanged from previous plan in 24-25.

Panasonic: Q3 2022 energy segment revenue of RMB11.98 billion (JPY 20.2:1, same below), +29.0%/+6.2% YoY; operating profit of RMB610 million, -30.7%/-23.9% YoY; operating margin of 5.1%, -4.4 pct/-2.0 pct YoY; mainly due to higher raw material and logistics prices and higher sales. The operating margin was 5.1%, -4.4pct/-2.0pct YoY, mainly due to the increase in raw material and logistics prices, as well as the increase in development expenses and fixed costs due to the increase in sales. In terms of production capacity, the 10GWh 4680 large cylindrical battery line at Wakayama plant in Japan is undergoing renovation and is expected to start mass production for supply to Tesla in North America in FY23. In addition, on October 31, Panasonic announced the construction of a 21700 cylindrical battery line in Kansas, and plans to use the state incentive program approved in July for investment, with construction expected to begin in November 22 and mass production in FY25, with initial capacity expected to be about 30GWh.

Investment advice: electric vehicle sales season has arrived, continue to be strongly bullish on the electric vehicle sector, the first main line of interest in Q2 earnings inflection point superimposed on energy storage plus battery, leading Contemporary Amperex Technology Co.Limited(300750) , Eve Energy Co.Ltd(300014) , Byd Company Limited(002594) , Pylon Technologies Co.Ltd(688063) , Sunwoda Electronic Co.Ltd(300207) , Jiangsu Azure Corporation(002245) , attention Sunwoda Electronic Co.Ltd(300207) , Jiangsu Azure Corporation(002245) ; the second for the continued shortage of stable earnings leader: diaphragm ( Yunnan Energy New Material Co.Ltd(002812) , Shenzhen Senior Technology Material Co.Ltd(300568) ), negative electrode ( Shanghai Putailai New Energy Technology Co.Ltd(603659) , Ningbo Shanshan Co.Ltd(600884) , Xinde new material, concern Betrayal, Hunan Zhongke Electric Co.Ltd(300035) ), structural parts ( Shenzhen Kedali Industry Co.Ltd(002850) ), additives ( Jiangsu Cnano Technology Co.Ltd(688116) ), precursors ( Cngr Advanced Material Co.Ltd(300919) , Zhejiang Huayou Cobalt Co.Ltd(603799) ), Bumite (concern Anhui Estone Materials Technology Co.Ltd(688733) ), aluminum foil ( Jiangsu Dingsheng New Material Joint-Stock Co.Ltd(603876) ); the third for earnings down but low valuation of electrolyte ( Guangzhou Tinci Materials Technology Co.Ltd(002709) , Shenzhen Capchem Technology.Ltd(300037) , Do-Fluoride New Materials Co.Ltd(002407) ), ternary ( Ningbo Ronbay New Energy Technology Co.Ltd(688005) , Beijing Easpring Material Technology Co.Ltd(300073) , Guizhou Zhenhua E-Chem Inc(688707) , Xtc New Energy Materials(Xiamen) Co.Ltd(688778) ), lithium iron ( Shenzhen Dynanonic Co.Ltd(300769) , Mason New Energy), copper foil ( Guangdong Jiayuan Technology Co.Ltd(688388) ( Nuode Investment Co.Ltd(600110) ); fourth for the price continues to maintain a high level of low valuation of lithium ( Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , etc.).

Risk tips: sales volume is not as expected, price competition than expected, investment growth rate decline, etc.

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