The joys and pains of achieving IPO in the mature period of the business cycle.
Wen Xiaonan. Edited by Cheng Mo.
* 10,000 point research.
Internal combustion engines in motor vehicles are responsible for around 15% of CO2 emissions per year. Phasing out the internal combustion engine will require the electrification of transportation, which in turn will require an unprecedented number of batteries.
Currently, most of the existing and planned battery factories are located in China. Many factories in Europe are built by Chinese companies. Some analysts pointed out that by 2030, China will have 69% of the world's battery production capacity, down from 78% in 2022, but still meet the batteries needed to produce 90 million cars per year.
Part of the reason why China is leading the way is that the policy support for the manufacture and implementation of new energy vehicles has taken longer. From 2010, when the purchase tax on new energy vehicles was reduced, to 2022, hundreds of billions of yuan were invested to support the new energy vehicle market through consumer incentives aloneThe manufacturer has also received further support through local**. These subsidies encourage competition among many emerging manufacturers from another angle.
Now, after a reshuffle between industries, winners such as BYD and CATL occupy a strong position. China's original electronic product chain advantages have also boosted the new energy vehicle industry.
According to the latest data released by the Association, in the first 11 months of 2023, the production and sales of new energy vehicles in China reached 84260,000 and 43040,000 units, a year-on-year increase of 345% and 367%, and the market share increased to 308%, 5 percentage points higher than in 2022, and the production and sales of new energy vehicles hit a record high.
At the same time, analysts in the market are playing up the export potential of China's new energy industry, hoping to create a valuation similar to Tesla's. The benefits for new energy manufacturers to thrive are not limited to the automotive market.
Power battery industry chain market participants, **Ping An** research report).
The relevant industrial chain has benefited greatly. CATL is already the world's largest manufacturer of lithium-ion automotive batteries. In 2021, it released the world's first sodium battery for new energy vehicles;CATL's main rival, BYD, itself an automaker, is also active.
To meet the projected growth demand, the stability of minerals** (including lithium and nickel, the most critical battery materials), battery metal processing, battery cells, separators, and other components needed to make lithium-ion batteries is critical for battery producers.
Expanding the battery chain to meet the demand for new energy vehicles is both an industrial challenge and a historical opportunity. Many upstream manufacturers attached to CATL and BYD have ushered in explosive growth, and the most direct effect is that these companies have rapidly increased their operating income and profitability in a short period of time, and they have seized the window period to the capital market.
Similar to the "fruit chain" of the year. The chain extends from Amazonas, Brazil, to many provinces in China, and about 150 of Apple's largest companies have factories in China.
At present, Xidian New Energy, which is sprinting to be listed on the main board, is one of the "Ningwang" ** businessmen, and in the context of the IPO slowdown, Xidian New Energy is like a hanging, from the declaration to the IPO, it only took 10 months. The company filed for an IPO on February 28, successfully passed the meeting on July 20, and was registered and effective on November 22.
What are the core competitiveness and technical barriers of Xidian New Energy?CATL has been cultivating its own first-class businessmen through the method of shareholding, and at the same time dispersing first-class businessmen to reduce costs, and Ningwang's ** chain reaches 40-50, who is the most worthy of attention?What is the "strategy" for the survival of enterprises in the **chain ecology?
The outside world believes that Ningde squeezes the best businessmen. But the fact is that the balance of the first business is one of the most common and basic common sense in all industries - everyone has to do this, but the final result of the "game" has to look at the strength of the enterprise.
Husband and wife entrepreneurship
Every listed company has a story to tell. Compared with other companies, the story of Xidian Xinneng's entrepreneurship is striking, starting from a mom-and-pop shop. Xidian Xinneng has been a mom-and-pop shop since its establishment in 2007 and before the share reform, founded by Sheng Jianhua and his wife, and the two have always held 50% of the shares.
Sheng Jianhua, 54, worked as a test engineer at the China Automotive Research Center and later worked at Schneider Electric for more than a decadeHis wife, Pan Shuxin, was his colleague during the CRRC period, and later served as the commercial director of Motorola, both of whom have rich experience in the automotive electrical industry, both of whom are engineers and have master's degrees.
Their entrepreneurship began in Suzhou in 2007, when because of the development of foreign trade and foreign industrial transfer, Suzhou has become a national key high-tech industry gathering place, the two invested 100,000 US dollars respectively to establish Xidian Machinery, at the beginning of the new energy composite busbar products as the market entry point, into the new energy power generation, industrial frequency conversion, rail transit and other fields. Later, in the new energy market in 2014, it increased its horsepower and successfully entered the new energy track.
During this period, Xidian New Energy launched the laminated composite busbar technology (in the electric drive system of new energy vehicles, the high-voltage connection runs through the lithium battery, electric drive devices and other electronic components, which is an indispensable component in the electrical architecture of the car. The composite busbar is a multi-layer composite structure connection circuit and a key carrier for high-voltage connection), which has successively become a stable supplier of Farah Electronics and BYD, and has successfully opened up the company's second growth curve.
After that, the team also developed a hot-pressed battery connection system for new energy battery systems, which eventually won the favor of CATL, which directly drove the explosive growth of Xidian New Energy's operating income and accelerated the process of Xidian's new listing.
In 2020, Xidian New Energy's battery connection system successfully entered the ** chain of CATL. In 2021 and 2022, Xidian New Energy's company's performance ushered in a big explosion, and the speed of light reached the listing conditions.
From 2020 to 2022, the operating income of Xidian New Energy will be 24.5 billion yuan, 81.3 billion yuan, 158.1 billion yuan, and the net profit reached 02.2 billion yuan, 0800 million yuan and 15.3 billion yuan, achieving leapfrog development.
Subsequently, Xidian New Energy introduced Changjiang Chendao, Farah Electronics, and Suzhou Huiqi as shareholders, and the three held 10% of the company's equity. The husband and wife's shareholding fell to 81 percent. In addition, it has a 9% stake controlled through an employee stock ownership platform. Among them, it is worth noting that Sheng Jianhua and Pan Shuxin have immigrated to Canada.
In this listing, Xidian New Energy plans to raise 8700 million yuan, of which 21.9 billion yuan for the expansion project of 8 million pieces of power battery connection system, 38.5 billion yuan for Chengdu battery connection system production project, 659180,000 yuan will be used for the construction project of the R&D center, and 200 million yuan will be used to supplement working capital.
It can be seen from the fundraising plan of Xidian New Energy that the main thing is to expand the production capacity of battery connection systems, which will further deepen the dependence on CATL. In addition, in terms of the amount of funds raised, the proportion of supplementary liquidity in the total amount raised reached 224%, which is in a relatively high position.
For the governance pattern of "mom-and-pop shops", is it beneficial or unfavorable for the development of the company?
In the author's opinion, from the perspective of corporate governance, if both husband and wife are in the company and are major shareholders, then the boundaries between family and business affairs are easy to blur, and the secondary market will fluctuateMany management practice cases have also proved that if a listed company has a leadership configuration mode with more than two people with decision-making power at the same time, it is easy to have poor communication, failure to reach a consensus, and too much internal friction in the operation, which will affect the company's operational efficiency.
Hug King Ning's thighs
Power batteries and even the entire automotive field is an industry that relies more on localized response. Whether it is a terminal brand or a battery manufacturer, they will cultivate their own "local supporting relationship network".
CATL has established a joint venture with a number of automobile manufacturers, and has also bound a number of upstream material factories, covering cathode materials, battery cells, battery packs and other links, which is not only beneficial to benefit sharing, but also conducive to process improvement.
The reason why Xidian Xinneng was able to achieve explosive growth in a short period of time was that it successfully entered the ** system of King Ning.
In 2017, Xidian New Energy launched the battery connection system, and the technology creatively applies the composite busbar technology to the production and manufacturing process of the battery connection system. In the years that followed, the technology was significantly improved and optimized.
The flashpoint of cooperation with CATL came from 2020, when CATL fell in love with Xidian New Energy's battery connection system, and from 2020 to 2022, CATL was the largest customer of Xidian New Energy, accounting for 29 percent of its operating revenue57%，69.1% and 744%。
CATL's purchase amount from Xidian New Energy increased from 73.9 million yuan to 118.5 billion yuan, during this period, the revenue of Xidian New Energy's battery connection system soared from 97.5 million yuan to 12200 million, that is to say, in the past two years, more than 96% of Xidian New Energy's battery connection system orders have come from the support of CATL.
It can be said that it is the help of CATL that has raised the revenue level of Xidian New Energy to the listing standard. The reason why he was able to win the favor of King Ning relied on:Low gross margin strategy.
According to the prospectus, in 2019, Xidian New Energy participated in the development of the large-scale module cell connection solution of the CATL T project, upgraded the original battery connection system products, developed large-size FPC hot pressing products, and supported automated production lines. In 2020, Xidian New Energy signed a long-term supply agreement with CATL and became the supplier of the battery connection system of CATL's T project.
At the same time, it is accompanied by the continuous decline in the gross profit margin of Xidian New Energy. From 2020 to 2022, the company's gross profit margin increased from 236% down to 178%, and lower than the same industry comparable.
In the reply to the inquiry letter, the comparable companies selected by Xidian New Energy include Changying Precision, Dakerui and Yilian Technology, and the average gross profit margin of these three companies from 2020 to 2022 is 2641%，21.2% and 2133%。In this regard, Xidian New Energy said that the difference in gross profit margin with comparable companies is mainly caused by business and product structure.
It is worth noting that even compared with Yilian Technology (which is mainly engaged in battery connection systems), which is basically the same product, the gross profit margin of Xidian New Energy is still much lower than that of Yilian Technology.
In the same period, the gross profit margin of Yilian Technology's battery cell connection components was 26% and 23 respectively34% and 2121%。In fact, Yilian Technology has been in contact with CATL since 2014 and supplied to CATL in June 2016, and the two sides have a certain history of cooperation and a certain first-mover advantage.
As a competitor that only entered the market in 2017, Xidian New Energy only promoted the battery connection system and hot pressing solution to CATL for the first time in 2018, and the evaluation between the two parties ended in 2019. At this time, Xidian New Energy can only adopt a more competitive strategy and be shortlisted for the T project with a relatively low gross profit margin, resulting in a lower gross profit margin of Xidian New Energy's battery connection system than Yilian Technology.
Once faced with the intensification of competition in the industry, the strategy of seizing the market with the first war will be the first to be compressed, especially in the context of CATL's increasingly strict control of the first chain and the trend of price reduction, the gross profit margin of Xidian New Energy has the risk of continuing to decline.
Not only that, but Xidian New Energy does not have much autonomy in the procurement of raw materials. According to the prospectus, the purchase amount of the designated ** merchants involved in Xidian New Energy has been 05.5 billion, 38.7 billion and 80.5 billion, accounting for 36 percent of the raw material procurement during the procurement period94%，62%，2.43 and 7187%。The company explained that CATL's position in the industry is strong, and it is due to the designation of the top business to strengthen the cost and quality management of raw materials.
There are hidden dangers in financial reports
The outside world believes that Ningde squeezes the best businessmen. But the fact is that the balance of quotient is one of the most common and basic common sense in all industries.
Relying on CATL for many years, Xidian Xinneng has benefited a lot. CATL has been able to hold the top merchants with rising sales, so that they are willing to exchange low gross profit for scale advantages for a long time.
There is no interest stimulus, ** what about enthusiasm?But from another point of view, the closer to the CATL era, a double-edged sword. This also leads to the long payment cycle and low operating cash income ratio of Xidian New Energy, and once it encounters external force majeure, the enterprise is prone to capital shortage.
First of all, the company's liquidity decreases. According to the prospectus, 200 million yuan of the raised funds were used to supplement liquidity, accounting for 23% of the total funds, which indirectly indicates that the company's liquidity is not abundant. Judging from the monetary funds of Xidian New Energy in each reporting period, from 2020 to 2022, the proportion of monetary funds in current assets of Xidian New Energy is 789%，3.98% and 308%, while the ratio of accounts receivable balance to current assets in the same period was 6068% and 6146% and 5854%。The amount of accounts receivable is from 1500 million yuan increased to nearly 7500 million yuan.
With the increase of operating income, the proportion of working capital of Xidian New Energy is gradually decreasing, and the proportion of accounts receivable to current assets is more than 6%. It can be seen that the gold content of Xidian Xinneng's assets is not high, according to the detailed rules of accounts receivable, mainly from the Ningde era, accounts receivable accounted for 7317%。
The above situation has led to a gradual decrease in the liquidity of Xidian New Energy, and from 2020 to 2022, the company's current ratio is 154，1.35 and 126, the quick ratio is 12，1.09 and 109。The asset-liability ratio was 5804%，65.81% and 703%。
In addition, the inventory of Xidian New Energy has been directly led to an increase in inventory due to the structural overcapacity of the downstream battery industry, and in the past three years, the inventory of Xidian New Energy has increased from 58.77 million to 1800 million, especially the proportion of inventory goods from 33 in 202026% to 46 in 202283%。The proportion of inventory goods in the total inventory increased from 30% to 45%, indicating that the downstream is in a situation of overcapacity, and the company's inventory turnover has declined. If the power battery industry is still in the stage of overcapacity adjustment in the future, then the inventory of Xidian New Energy will further rise.
As of the signing date of the prospectus, Xidian Xinneng has obtained 46 authorized patents of various types, including 4 invention patents, and the gap is not small compared with comparable patents in the same industry.
Judging from the company's invention patents, most of the invention patents are concentrated in laminated busbar products, and there are not many patents for battery cell connection components that account for nearly 70% of the company's operating income, and most of them are obtained after 2020.
In 2020, the company's R&D expenses were 11.47 million yuan, 27.78 million yuan and 47.95 million yuan, accounting for 459%，3.38% and 301%。The proportion of R&D investment is declining year by year, and compared with comparable companies, the R&D investment of Changying Precision, Ruida and Yilian Technology in the same industry is 651%，6.38% and 559%, which is significantly higher than the proportion of R&D investment of Xidian New Energy.
In addition, the average salary of the company's R&D personnel decreased from 190,000 in 2019 to 170,000 in 2017 during the reporting period. The proportion of R&D investment has been significantly reduced, so once Xidian New Energy is unable to develop new products or new products cannot meet the needs of CATL in the future, the company's performance will be greatly challenged.
Ningwang is not only its largest customer, but also a shareholder. On the eve of the IPO, the company's largest customers, CATL and Farah Electronics, held 2% of the company's shares, and CATL held about 1% of the shares.
Competition in the industry has intensified
The main concern about Xidian New Energy is the overcapacity problem of the downstream power battery industryFirst, if new energy vehicles reach saturation ahead of schedule, it may lead to a slowdown in the revenue growth of the industrial chainSecond, the gross profit margin has declined, the upstream and downstream industrial chain has seen sales pressure, and the huge depreciation caused by the early investmentThird, lithium iron phosphate may indicate an oversupply in the new energy market.
In 2023, the growth rate of new energy electric vehicles in China has slowed down, with a growth rate of ** to 15%. Last year, the production and sales of new energy vehicles increased by more than 90%, and at the same time, the cancellation of subsidies for new energy vehicles was superimposed.
In the field of power batteries, various companies have been in the stage of capacity expansion in recent years, first of all, Yilian Technology, which has a relationship with its twins, has built production bases in Shenzhen, Ningde, Liyang, Jiangsu, Yibin, Sichuan and other places, and its main products cover battery cell connection components and. After the IPO, it is also planned to raise 119.3 billion yuan to expand the production project in Liyang, after the project is completed, the production capacity of Yilian Technology will double.
In addition, the competitor Ruida, which went public as early as July 2021, is also expanding its production capacity. The company issued nearly 500 million additional funds on September 15, 2022, and invested nearly 300 million yuan of its own funds to increase the company's production capacity in new energy connectors. In the future, after it is put into operation in 2024, its production capacity of new energy vehicle connectors will be expanded to nearly 14 million sets, which will expand the production capacity in the past two years ahead of Xidian New Energy. The gross profit margin of Ruida itself is higher than that of Xidian New Energy.
In the context of intensified competition in the industry, Xidian New Energy is likely to be unable to catch up with market competition, and it is likely to face a trend of further gross profit margin after the final capacity expansion.
Therefore, once the new energy vehicle terminal market is impacted, it is not a good thing for the upstream businessmen who rely on CATL for their livelihood, and in this context, the IPO of the first business is an important opportunity to seize the "window period" of industry development.
Let's take a look at the relevant data of CATL's third quarterly report. From January to September, CATL's loading volume exceeded 109GWh, with a market share of 4275%, still ranked first, however, down 06 percentage points, down 48 percentage points. BYD's new energy vehicles continue to sell well, squeezing CATL's market share in the domestic power market.
Previously, CATL explained in the third quarterly report meeting:
Considering that there is greater competitive pressure on the car company side, in order to support customer development and deepen customer cooperation, Q3 has some rebate arrangements for car company customers at the power battery end, which is reflected in the reduction of revenue, which has a corresponding impact on profits, but the overall unit profitability of Q3 battery is still relatively stable;Superimposed next year's 4C lithium iron phosphate superchargeable battery, M3P and other new technologies and new products, the company will have more advantages in next year's market competition. ”
To put it simply, due to the fierce competition among downstream car companies, in order to support customer development, the company has rebated power battery customers (it can be understood that the company's products have been reduced in disguise), which directly led to the slowdown in revenue and profit growth of CATL in the third quarter.
Although the domestic market share has declined, the rapid development of the international market has made CATL's global power battery market share remain stable.
According to data from South Korean research institute SNE Research, from January to August this year, CATL's global power battery usage (including domestic) market share remained at 369%, continuing to rank first in the world.
What Xidian New Energy is facing is the problem of general awareness in the industry, and the essence is the logic of the industry growth cycle.
According to the data released by the China Automotive Power Battery Industry Innovation Alliance (hereinafter referred to as the "Battery Alliance"), from January to September, the cumulative installed volume of domestic power batteries was 2557GWh, a cumulative year-on-year increase of 32%. Power batteries are still an incremental market at present.
Objectively speaking, the penetration rate of new energy vehicles in 2020 and 2021 is still very low, between 10% and 15% at that time, and the current penetration rate of domestic new energy vehicles has come to around 35%.The slowdown in growth is an inevitable trend, and it is necessary to lower expectations in terms of investment.
If A-share high-end liquor is a business that cannot be changed by the world, then CATL is the company that changes this era. However, the rapid change of technology also directly determines that the investment cycle of this track will not be very long, nor can it be too long.
Zhang Kun said that most people prefer industries with growing demand, rather than industries with stable supply-side patterns. CATL belongs to the former, and the demand of the industry is still growing, but the competition on the supply side is also intensifying.
It has become a new trend for car companies to participate in self-developed batteries
In fact, many car companies, including NIO, GAC Aion, and ZEEKR, have recently released their self-developed battery technology. Obviously, self-developed batteries consume energy and cost a lot, and at the same time, there are mature power battery manufacturers like CATL in China, so why are car companies still so keen on self-development?
For car companies, an important reason for self-developed batteries is cost.
Different from traditional fuel vehicles, power batteries are one of the most important components of new energy vehicles, accounting for more than 40% or even more than 50% of a pure electric vehicle.
Especially in the current fierce new energy vehicle market, if you want to get rid of the cycle of "selling more and losing money", you must reduce the cost in order to achieve profitability.
With the continuous increase in the penetration rate of new energy, the sales of new energy vehicles of various car companies are also rising. Although the initial investment is large, once the scale efficiency is formed, the cost reduction will be considerable, and it is asked which car company does not envy BYD's vertical integration ability in the industrial chain in the field of new energy.
Secondly, the layout of car companies in the battery field can also enhance the right to speak in the industrial chain and get rid of the restrictions of the first chain. For such an important power battery, car companies naturally hope to ensure safety, and do not want to be subject to the best chain enterprises in the future, and firmly grasp the safety in their own hands.
In addition to cost and chain factors, car companies' self-developed batteries can also create differentiation in technology, avoid being too homogeneous with other competing car series in such an important component, and at the same time can also show their technical capabilities.
As the competition in China's new energy vehicle market gradually becomes fierce, power batteries also need to gradually get rid of standardization, and it is believed that more car companies will participate in the self-development of batteries in the future.
This is both an opportunity and a challenge for the top businessmen of CATL.