Cathay Pacific Haitong: Valuation starts and falls, leading the relationship between supply and demand, and the lithium battery industry has good allocation value

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that looking at the full cycle of shortage to surplus in the lithium battery industry from 2020 to 2024, the start and fall of valuation often leads the relationship between supply and demand. In view of current market concerns that the industry's growth rate may slow in 2027, valuations in some leading sectors have fallen back to historically low levels. The performance growth rate is highly compatible with valuation, and they already have good allocation value.

Cathay Pacific Haitong's main views are as follows:

In 2020-2024, lithium battery demand experienced the four stages of “policy cultivation - technology upgrade - demand explosion - growth slowdown”

In January 2009, China launched the “Ten Cities Thousand Energy-saving and New Energy Vehicles Demonstration, Promotion and Application Project” to promote the demonstration operation of new energy vehicles in the fields of public transportation, leasing, public affairs, municipal administration, postal services, etc. through financial subsidies, and kicked off the development of the NEV industry. In December 2016, the “Notice on Adjusting the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles” was issued, which requires raising the entry threshold for financial subsidies in terms of vehicle energy consumption, driving range, battery performance, safety requirements, etc. on the basis of declining regulations to promote technological upgrading in the new energy industry. In 2020, with the gradual improvement of the domestic NEV model matrix, the three categories of affordable mobile, long-life household, and high-end smart products covered the multi-level needs of consumers, and demand for NEV terminal purchases entered a large-scale explosion period. In 2022, the continued sharp rise in lithium carbonate prices raised market concerns about the continuation of demand. Compared with 2021, the sales growth rate of new energy vehicles declined somewhat, and the growth rate is expected to peak. Entering 2024, the sales growth rate of new energy vehicles stabilized, demand for energy storage gradually picked up, the growth slope of lithium battery demand gradually stabilized, and fundamentals ushered in new opportunities.

In 2020-2024, lithium battery supply expanded at an accelerated pace, moving from scarcity to structural surplus

With the explosive growth of the downstream NEV market, the lithium battery industry has entered a peak period of capacity expansion, and the total investment scale of domestic production expansion projects from 2021 to 2023 has exceeded 300 billion yuan. Entering 2023, along with the slowdown in the growth rate of downstream demand and the release of production capacity in the early stages of large-scale production expansion, the industry gradually entered a phase of overcapacity. In 2024, the planned production capacity of domestic lithium batteries was about 590 GWh, a year-on-year decrease of 60%; the total investment exceeded 180 billion yuan, a year-on-year decrease of 68%, and capital expenditure contracted significantly.

In 2020-2024, stock prices experienced three stages: high growth premium, valuation contraction, and divergence repair

Sales of new energy vehicles rose rapidly in 2020, and the market gave the lithium battery industry a high growth premium. The Ningde Era PE-TTM soared from 54 times in March 2020 to 287 times the highest point in 2021. As the market peaked in 2022, the growth rate peaked, and the sector entered a period of valuation contraction. By 2023, the Ningde era PE-TTM had an extreme historical ranking of 15 times until the end of 2023. Entering 2024, the domestic automobile trade-in policy will increase new energy subsidies to stimulate domestic new energy sales, and performance will drive valuation repair. Judging from the review process, sector start-ups are often ahead of supply and demand relationships and performance reports. Fund holdings have experienced everything from group formation to withdrawal to structural position adjustment, and allocation increases are highly concentrated in industry leaders such as the Ningde era with a degree of performance delivery.

Risk warning: demand for mobile storage falls short of expectations, and industrial competition intensifies