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CATL once again to invest.

On the evening of July 21st, CATL (300750) announced that the board of directors agreed that the company would use idle raised funds of no more than 5.5 billion yuan (including the principal amount) for cash management, and invest in capital protected investment products with high safety and good liquidity. The term of use would be valid for 12 months from the date of approval by the board of directors. Within the validity period of the above limit and resolution, it can be used in a circular rolling manner.

Source: CATL Announcement

According to the announcement, CATL plans to invest in various product varieties, including but not limited to principal guaranteed financial products, structured deposits, time deposits, or large certificates of deposit, with a holding period of no more than 12 months.

At the same time, it is also necessary to meet the following requirements: 1. High safety, meeting the breakeven requirements, and the product issuer being able to provide a breakeven commitment; 2. Good liquidity does not affect the normal operation of the raised investment project.

As soon as the news came out, some netizens expressed that they were "wealthy" and "5.5 billion yuan can buy a listed company".

CATL stated that using some temporarily idle raised funds to invest in safe and liquid capital protected investment products will not affect the company's funding needs for raised funds investment projects. By implementing moderate cash management, the company can improve the efficiency of using raised funds, achieve certain investment benefits, further improve the overall performance level of the company, and seek better investment returns for the company and shareholders.

5.5 billion yuan may be the total market value of a listed company, but for CATL with a market value exceeding trillion yuan, it is a proof of sufficient holding funds. It's like investing 38 billion yuan twice in domestic and foreign industrial chains. CATL announced in August 2020 that it plans to invest 19 billion yuan in high-quality listed companies upstream and downstream of the domestic and foreign industrial chain; On April 28, 2021, CATL once again announced that it would invest another 19 billion yuan to layout the domestic and foreign industrial chains.

From this perspective, CATL is indeed not short of money and has formed an "investment empire".

Closed loop CATL

At present, CATL's position in the domestic power lithium battery industry is still very stable. According to the data of China's Automotive Power Lithium Battery Industry Innovation Alliance, in the first half of this year, the installed capacity of CATL power lithium batteries was 25.76 GWh, ranking first with a market share of 49.1%.

CATL accounts for almost half of the domestic power lithium battery market share, but is still considered a pure automotive supplier by vehicle manufacturers, or a prefix with the "highest market value".

From the perspective of the new energy vehicle industry, CATL and downstream vehicle manufacturers do have a zero integration relationship, but CATL will not accept it and is not willing to only be a battery supplier.

In recent years, CATL has been adhering to a two legged approach, one is to develop its battery business, and the other is to make industrial investments and become an "investment oriented" company.

Because in order for a company to grow and strengthen, it must strengthen industry chain cooperation and collaboration, commonly known as industrial investment. Only by blooming in multiple places can the "blood" become thicker, and the company's scale and competitiveness be improved.

According to incomplete statistics, CATL's "Investment Empire" has invested over 200 billion yuan. Since 2017, it has invested in over 50 industry chain companies and established over 10 wholly-owned subsidiaries. That is to say, CATL invests in an average of over 10 companies annually.

From the perspective of CATL's investment direction, it has a wide range of investment fields, from upstream materials and equipment, to midstream battery pack and cell factories, and then to downstream battery recycling, vehicle factories, autonomous driving, chips, energy storage, transportation and other fields.

It is no exaggeration to say that CATL is centered around itself, forming a closed loop.

Upstream investment: CATL has made a complete layout in mineral resources (copper, cobalt, lithium, nickel), lithium salt materials (lithium carbonate and lithium hydroxide), and positive electrode materials, and also holds shares in nearly ten different lithium battery equipment companies. For example, we have supported a group of listed companies such as German Nano and Greenmey, invested in Indonesian state-owned mining company PTAneka Tambang, and participated in companies such as North American Lithium, North American Nickel, Australian lithium miner Pilbara, and Canadian lithium manufacturer NeoLiquidumCorp. In terms of equipment, subscribe to shares of Pioneer Intelligence and invest in new energy equipment company Mengteng Intelligence.

Mid stream investment: CATL has established joint ventures with multiple host manufacturers for the production of battery cells and battery packs, and has also invested in multiple power lithium battery system companies. Including joint ventures with SAIC, FAW, GAC, Dongfeng, Geely and other automotive companies, the total production exceeds 145GWh, and it is expected that the joint venture company's production can reach 42GWh by the end of 2021.

Downstream investment: CATL's investment in downstream can be described as "rich". Firstly, it is battery recycling. CATL has invested in Bangpu and Greenway and helped them increase their market share; Secondly, in the field of complete vehicles, Nanjing Karui Innovation and Entrepreneurship Management Service Co., Ltd. was jointly established with NIO to explore battery swapping technology. Next, Changan Huawei built cars together, and now they have invested in Aichi Automobile; Furthermore, in the field of autonomous driving, CATL has led the investment in Yingche Technology and also established a joint venture with unmanned mining company Yuepai Intelligent; The fourth is the chip field. Last year, CATL joined hands with eight companies including Hubei Xiaomi Changjiang Industrial Fund Partnership (limited partnership) to invest in Hangzhou Xinmai Semiconductor Technology Co., Ltd., with a shareholding of 2.7027%. This year, CATL invested in Horizon, a domestic autopilot chip company.

The fifth is the energy storage field, which is also the most promising market recognized by CATL. In 2018, Jinjiang Mintou Electric Energy Storage Technology Co., Ltd. was jointly established with Fujian Investment and Development Group and a subsidiary of China Power Construction Group. CATL also established two joint ventures with State Grid Comprehensive Energy and a joint venture with Keshida (the energy storage project has already started). At the end of last year, they also invested 221 million yuan in Yongfu Co., Ltd., a listed company in the energy storage field, becoming its third largest shareholder. This year, the two sides also jointly established "Times Yongfu" to explore the "photovoltaic+energy storage" model.

The sixth is in the field of transportation, jointly investing 1 billion yuan with Haro Travel, Ant Financial Services, and other companies to form a joint venture company, Ningde Zhixiang, and layout two rounds of electricity exchange. At the same time, I also participated in the A-round financing of SAIC's travel brand, Xiangdao Travel.

Due to the continuous expansion of CATL's investment landscape, CATL concept stocks have also emerged.

Unlike the external division of its investment layout, CATL officially divides its company strategy into three major development directions, and also invests along these directions. At this year's Shanghai Jiao Tong University anniversary, CATL Chairman Zeng Yuqun also mentioned these three major development directions.

One is to replace fixed fossil fuels with renewable energy and energy storage as the core. According to Zeng Yuqun, "In the field of energy storage and power generation, especially in the field of new solar cells, it is possible to combine and then replace fixed fossil fuels

The second is to replace mobile fossil fuels with lithium batteries as the core. As the name suggests, mobile fossil energy is an energy carrier that can be moved, loaded, unloaded, and replaced. At present, CATL's layout in this direction includes new energy vehicles, mobile robots, and mobile energy storage devices. According to the 2020 annual report, of CATL's total revenue of 50.3 billion yuan, 39.4 billion yuan is concentrated in mobile terminals, with new energy vehicles accounting for over 90%.

The third is to achieve integrated innovation in market applications with electrification and intelligence as the core. There are a wide range of fields that can be electrified, including new energy vehicles, the two wheel travel market, and robotics. The investment in autonomous driving and chip fields mentioned earlier is the combination of intelligence and electrification in the field of new energy vehicles. In addition, CATL and unmanned mining company Leap Pay Intelligence have established a joint venture, which shows that CATL wants to achieve intelligent unmanned electrification of mineral collection.

Source: CATL

Shoulder to shoulder with Ren Zhengfei

Meituan CEO Wang Xing once wrote on his personal account, "Zeng Yuqun of CATL is a company family who will be comparable to Ren Zhengfei in the future

In Wang Xing's sentence, he mentioned both CATL and Zeng Yuqun, and there is no doubt that these two are a whole, and they are mutually successful.

CATL was established in 2011 and went public on the Shenzhen Stock and Equity Exchange on June 11, 2018. At that time, the issuance price was 25.14 yuan per share, and the total market value was only nearly 50 billion yuan.

As of the close of today (July 22nd), CATL is trading at 557.08 yuan per share, with a total market value of 1.30 trillion yuan. That is to say, after three years, compared to when CATL went public, the stock price of CATL has increased by more than 21 times, and the total market value has increased by 25 times.

In 2020, CATL had a revenue of 50.3 billion yuan and a net profit of 5.583 billion yuan. The analysis of secondary market institutions suggests that CATL will have a relatively high growth rate in the next three years. It is predicted that CATL's net profit from 2021 to 2023 will be 9.62 billion yuan, 13.8 billion yuan, and 20.1 billion yuan, respectively, corresponding to dynamic P/E ratios of 94 times, 66 times, and 45 times.

This is the judgment of the capital market that CATL will remain overvalued in the future. Of course, CATL also has two major hidden concerns: gross profit margin and market share. In terms of gross profit margin, it was 43.7% in 2016, and in the middle four years, it has consistently decreased to 26.56% in 2020. In terms of market share, CATL failed to maintain its domestic market share of over 50%, and its share decreased to 49.1% in the first half of this year.

However, power lithium batteries are only one aspect of CATL's business. With the improvement of its investment landscape, CATL will not only be a car supplier, but may also become a unique new energy giant. So, Wang Xing's evaluation of Zeng Yuqun will become a forward-looking prophecy.

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