I. Updates in the Negative Electrode Industry

Market News: This month, Company B’s tender price for negative electrodes increased by 15% compared to the previous month. Leading negative-electrode manufacturers are strongly inclined to raise prices, though the final pricing has yet to be finalized.

Since Q2, capacity utilization rates among leading negative-electrode manufacturers have been fully booked, yet the industry’s overall utilization rate remains low, and market share continues to be heavily concentrated among the top players. As early as Q1, Company B had already raised prices once in its tender process; this latest round of price increases in bidding further confirms that negative-electrode prices have now reached the industry’s bottom level. With the peak production season approaching in the second half of the year, leading companies are expected to raise their prices.

[CT Electric New] Shangtai Technology: Full production capacity in June and July; Q2 net profit per ton remains above 3,000 yuan; negative electrode prices expected to rise in Q3!

Large customers are ramping up their demand for fast chargers, and the company is operating at full capacity in the second quarter. Demand from major downstream customers remains strong (with C factory accounting for 70% of the total), and fast-charger production is picking up rapidly. Currently, we can already see full production in June, and July will likely also be at full capacity. With a single Lang capacity of 20,000 tons, we expect to ship 55,000 tons in Q2, with an additional increase in volume as well. At present, we have outsourced several hundred tons of production. During the peak seasons in the third and fourth quarters, we anticipate that capacity utilization will remain high, and our full-year shipments are expected to reach 200,000 tons.

Electricity prices are under control, and costs continue to remain competitive compared to peers. Previously, due to lower negative electrode prices and higher electricity tariffs at the beginning of the year, the market expressed concerns about the company’s profitability and anticipated a decline in net profit per ton in Q2.

However, in reality, the impact of price cuts has largely been absorbed in the first quarter (a 10% price reduction), with net profit per ton remaining steady at 3,800 yuan. In the second quarter, the primary focus was on offsetting the impact of rising electricity prices. Since January 1 of this year, the company’s electricity tariff has increased by 0.15 yuan to 0.45 yuan per kilowatt-hour. Based on an annual electricity consumption of 9,000 kilowatt-hours, this is expected to add approximately 1,350 yuan to costs. Yet, through measures such as shifting electricity usage away from peak hours, optimizing power delivery curves, and adjusting furnace settings, the company managed to keep cost increases to just a few dozen yuan—far below expectations and surpassing its peers by at least 2,000 yuan.

Looking ahead to the full year, downstream demand remains robust, and the supply-demand balance is expected to gradually improve, with price hikes likely in Q3. Moreover, the impact of electricity prices will be largely absorbed by Q2, making Q2 the bottom for profitability. With various cost-reduction measures taking effect going forward, net profit per ton is poised to keep rising. We estimate the company’s net profit attributable to shareholders at RMB 700 million and RMB 900 million for 2024 and 2025, respectively, corresponding to P/E ratios of 17x and 13x. We recommend paying close attention!

II. Lithium Batteries: Expectations of Another Price Increase for Negative Electrodes—Beta Rebound in the Sector Imminent

1. Recently, there have been reports of negative electrode bidding by leading battery manufacturers. As far as we know, the final results have not yet been announced. However, relatively accurate information indicates that...

1) No companies are taking on low-priced orders anymore.

2) In the negotiation and price discussions, some companies raised their quotes, while others kept their quotes unchanged; however, at least in terms of direction, there was a clear willingness to hold prices steady.

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