forzahorizon5hotwheelscrash| Is it all the trouble caused by lithium batteries? Shantou company's performance has been dragged down by losses of 431 million yuan, long debts have become shorter, and cash flow has become urgent

Even if it is good for the policy of "guiding lithium battery enterprises to reduce and simply expand capacity" by the Ministry of Industry and Information Technology.Forzahorizon5hotwheelscrashGuanghua Technology (002741SZ) shares rose only slightly by 2% on the second day of the news.Forzahorizon5hotwheelscrash.61%, which has continued to be depressed since then, and has now fallen below 11 yuan per share.

As a not pure lithium battery stock, Sinorama Technology has the same trend as the lithium battery plate, peaking in 2021, rising and falling in 2022, the best part of the first wave at the beginning of 2023, and then an endless decline.

Sinorama Technology's performance has also experienced great ups and downs, with an operating income of 26% in 2023.Forzahorizon5hotwheelscrash.99 billion yuan, down 18.26% from the same period last year, and net profit was-431 million yuan, down 468.55% from the same period last year. Looking back at the situation in 2022, Guanghua Technology's operating revenue increased by 27.99% compared with the same period last year, and its net profit increased by 162.38%.

It's all the fault of lithium electricity. Sinorama technology mainly has PCB, lithium materials, chemical reagents three business sectors, other business is basically stable, only lithium ups and downs. In 2023, the utilization rate of lithium power production capacity of Guanghua Technology is only about 40%, and there are still 26000 tons of capacity under construction.

For issues such as capacity digestion, declining performance, and financial situation, a reporter from the Huaxia Times sent an interview outline to Guanghua Science and Technology and called Dong Secret Office many times, but had not received a reply as of the date of publication.

Wang Wei, chief expert of Hillhouse Energy (Shanghai) Co., Ltd., said in an interview with reporters.Forzahorizon5hotwheelscrashOvercapacity in the lithium power industry is an indisputable fact, and it is obviously a huge competitive pressure for lithium power enterprises. The future restructuring of lithium power enterprises is inevitable, and its path is similar to that of photovoltaic enterprises. Vertical integration is an inevitable trend. "

Capacity utilization rate of lithium battery is only 40%.

For the lithium power industry, controlling production capacity is tantamount to rain after a long drought.

According to the announcement of lithium battery industry norms, enterprise information and industry associations estimate that the total output of lithium batteries in China exceeded 940GWh in 2023, an increase of 25 percent over the same period last year, and the total output value of the industry exceeded 1.4 trillion yuan. At the same time, product prices in the lithium battery industry dropped significantly throughout the year, with cell and battery-grade lithium salt prices falling by more than 50% and 70% respectively from January to December.

From the micro level, the utilization rate of lithium power production capacity of many lithium power enterprises is low in 2023. The capacity utilization rate of the battery system in the Ningde era, the industry leader, is only 70.47% in 2023, 83.4% in 2022 and 95% in 2021. The utilization rate of lithium hexafluorophosphate capacity is 70% in 2023, and another 40,000 tons / year capacity is under construction. In 2022, the utilization rate of lithium hexafluorophosphate capacity is 88%. Xiangfenghua, which is mainly engaged in anode materials, has a capacity utilization rate of 82.69% in 2023. It should be noted that its capacity has been insufficient and needs to be contracted to meet the order demand. The capacity utilization rate is 109.78% in 2022 and 111.63% in 2021.

So what is the capacity utilization rate of Sinorama Technology? In 2023, its lithium battery material design capacity is 52600 tons, capacity utilization is only 40.46%, and another 14400 tons are under construction. In 2022, Guanghua Science and Technology has a design capacity of 41000 tons, with a utilization rate of 90.52%. In other words, Sinorama Technology added 11600 tons of production capacity in 2023, but reduced production by 15800 tons.

Between an increase and a decrease, Guanghua Technology's gross profit margin fell to negative. In 2023, the gross profit margin of Guanghua technology lithium battery material is as low as-21.54%. The figures for 2021 and 2022 were 13.15% and 16.65% respectively.

Unstable lithium power business

Sinorama Technology's lithium battery materials mainly include ternary precursors and ternary materials, ferric phosphate, lithium ferric phosphate and lithium ferromanganese phosphate, cobalt salt, nickel salt, manganese salt and so on.

And this business is not the traditional main business of Sinorama technology, PCB chemicals and chemical reagent products are. The so-called PCB is the printed circuit board, which requires high-purity electronic compounds to be plated on the circuit board to achieve its function. Sinorama Technology can produce this high-purity electronic compound, also known as PCB chemical.

Another traditional main business is chemical reagents, including analytical reagents and special reagents. The functions of the products are mainly used in analytical testing, teaching, scientific research and development, as well as specialized chemicals in the field of emerging technologies.

Therefore, Sinorama Technology is inherently the gene that deals in chemical products, and lithium battery materials are only one kind of chemical products.

Sinorama Technology was listed in 2015, although there was no lithium battery material business at that time, but it was already taking shape. One of the technical reserves at that time was "development of synthesis technology for high-quality electronic-grade cobalt carbonate", which used cobalt sulphide as raw material to develop high-quality cobalt carbonate production technology that could be used in lithium battery production. Cobalt carbonate can be used to produce cobalt tetroxide, and cobalt tetroxide can be used to produce lithium cobalt oxide as cathode material of lithium battery. These metal compounds do not leave the category of electronic chemicals.

Therefore, unlike some enterprises "speculating" to enter the lithium power industry to "make quick money", Sinorama technology cutting into lithium power is nothing more than an extension of its business. Sinorama Technology began to distribute lithium battery materials in 2016 and generated revenue in 2017, making it another major business besides PCB chemicals and chemical reagent products. From 2017 to 2020, Guanghua Technology's lithium battery materials business grew steadily, and its operating income gradually increased from 127 million yuan to 288 million yuan in four years. At that time, the designed production capacity was 26000 tons, and the production capacity under construction was 10, 000 tons.

With the sudden rise of the lithium power industry in 2021, Sinorama Technology expanded its production capacity and wanted to take the opportunity to "make a fortune", so it planned to issue new shares to raise funds to invest in high-performance lithium battery materials. According to the plan at that time, Guanghua Science and Technology raised 1.25 billion yuan, mainly investing 1.17 billion yuan in high-performance lithium battery materials.

Although the fund-raising plan for the project was not approved in the end, Guanghua Science and Technology has made up its mind to expand production and started to invest in lithium battery materials before raising funds. In 2022, 15000 tons of new production capacity was added, with both production and sales booming that year, with capacity utilization reaching a record 90.52%, and the sector's operating income reached 1.293 billion yuan. Another 11600 tons were added in 2023, but the situation is much lower than that of the previous year, with operating income falling to 583 million yuan, down 54.91% from the same period last year, and gross profit margin of-21.54%, which has become the main reason for Sinorama's loss.

At present, Sinorama Technology still has a production capacity of 26000 tons of lithium battery materials under construction, but product prices have dropped significantly, and sales are not as good as before. How to digest such a huge capacity is a problem that Sinorama Technology has to face.

Cash flow is urgent

Even trickier is the looming shortage of cash flow.

In order to expand production, Sinorama Technology raised a large amount of money in 2022, with long-term loans increasing by 254 million yuan that year and short-term loans reaching 540 million yuan at the end of the period. Since then, Sinorama Technology has maintained a high amount of short-term borrowing, accounting for 485 million yuan at the end of 2023, accounting for about 15 per cent of total assets.

At the end of March 2024, the short-term loan of Sinorama Technology rose to 651 million yuan, an increase of 166 million yuan in a quarter, while its monetary capital was only 227 million yuan. In the coming year, Sinorama Technology will need a large amount of cash flow to repay its debts.

From the perspective of asset-liability structure, by the end of 2023, Guanghua Technology's current assets were 1.491 billion yuan, current liabilities were 1.521 billion yuan, and working capital was negative.

A certified public accountant told the Huaxia Times that working capital is the necessary funds used to maintain the circulation of funds in the daily operation of enterprises, which is very important to the operation and survival of enterprises.

What is puzzling is that in the face of a serious shortage of working capital, Sinorama Technology also deliberately replaced part of its long-term loans with short-term loans in the first quarter of 2024. For example, the increase in short-term borrowing in the first quarter and the decrease in long-term borrowing are due to the adjustment of the long-term and short-term borrowing structure in order to reduce financing costs. Sinorama Technology calls it "optimization".

(source: Huaxia Times)