China Battery Materials_ Takeaways from Battery Expert Call with GGII

Summary of Key Points from the Battery Expert Call with GGII Industry Overview - The discussion focused on the lithium-ion battery market, particularly in the context of electric vehicles (EVs) and energy storage systems (ESS) [1][2]. Core Insights - EV Battery Demand Forecast: Expected to reach 900-950 GWh by 2025, a revision from an earlier estimate of 1 TWh [6]. - ESS Demand Forecast: Anticipated to reach 350-400 GWh in 2025, up from an initial forecast of 240-250 GWh [5][1]. - Production Outlook for 4Q24: EV battery production is projected at 730-750 GWh for 2024, lower than the previous estimate of 800 GWh. In contrast, ESS battery shipments are expected to exceed 300 GWh [2]. - Production Growth Rate: A smaller sequential decline in production growth is anticipated in January 2025 compared to January 2024 [4]. Market Dynamics - Impact of PHEV Models: Plug-in hybrid electric vehicles (PHEVs) account for over 40% of battery demand but have a lower average battery capacity, which diminishes their overall impact on EV battery demand [6]. - Tariff Risks: Potential US tariffs on ESS cells could influence order placements, with demand in the Middle East and South Asia exceeding pre-election expectations [5]. Material Costs and Processing Fees - Cathode Material Processing Fees: Fees for lithium iron phosphate (LFP) cathode materials have increased from RMB 15,000/t to RMB 20,000/t due to rising demand for high-density LFP [7]. - Copper Foil Processing Fees: Increased from RMB 15,000/t to RMB 18,000/t, with a forecast to reach RMB 20,000/t by year-end [10]. Company Valuations - CATL Valuation: Valued at RMB 362/share based on a 17.0x 2024E EV/EBITDA, implying a 30.8x 2024E P/E and 23.7x 2025E P/E [13]. - Shenzhen Kedali Valuation: Valued at RMB 92.03/share based on a 15x 2025E P/E multiple, reflecting overall low sentiment in the battery space [15]. Risks Identified - CATL Risks: Include lower-than-expected EV demand, increased competition, and higher raw material costs [14]. - Shenzhen Kedali Risks: Include slower-than-expected battery demand, intensified competition, and rising raw material costs [16]. Additional Insights - The overall material prices in the battery industry are experiencing upward pressure, with significant reductions in the supply of electrolytes for new projects [10]. - The utilization rate in the industry remains low, although leading companies exhibit relatively higher rates [10]. This summary encapsulates the critical insights and forecasts regarding the lithium-ion battery market, highlighting both opportunities and risks for investors in this sector.