Under the new round of lithium battery expansion cycle, how do diaphragm companies seize the opportunity?

On May 23, the first phase of Levi Energy’s 10GWh power battery project and the second phase commencement ceremony were held in Chuzhou, Anhui. The project has a total investment of RMB 5 billion and will be completed in two phases. The design capacity of the first phase of the project is 5GWh, mainly producing soft packs and cylindrical power batteries. On May 20, Sinochem Group and Jiangsu Yangzhou Economic and Technological Development Zone signed a memorandum of understanding, Sinochem Group will invest in Yangzhou ternary lithium battery project for vehicles. The total investment of the project exceeds 10 billion yuan. The overall plan is to build a lithium battery production line with an annual output of 20GWh, which will be implemented in three phases. As the leader of the lithium battery industry, the dynamics of the Ningde era are considered to be the vane of the industry, and it has always attracted a lot of attention from the new energy vehicle industry chain. On April 25, Ningde Times issued a new round of production expansion announcement: it plans to invest no more than 4.624 billion yuan to expand production in the west of Ningde Lake; it plans to establish a joint venture with FAW Group to establish a time FAW power battery company, and the investment does not exceed 4.4 billion yuan to expand in Ningde Xiapu Produce. In addition, Xinwangda is expected to reach 10GWh in 2019, and 20GWh of production capacity will be formed by 2020; Japanese and Korean companies have built factories in China...A series of activities are releasing the same signal: lithium batteries have entered a new round of expansion cycle. So, in the new round of lithium battery expansion cycle, how should diaphragm companies, as the upstream of lithium battery, seize this opportunity? We know that the diaphragm is one of the four key materials of lithium-ion batteries, and the main applications are consumer electronics, power batteries, energy storage and other fields. In 2018, global lithium battery shipments were 189GWh. Benefiting from the rapid growth of power batteries, shipments in 2025 are expected to reach 1,034GWh, which is about 5.5 times that of 2018. Switching to the diaphragm link, the demand in 2025 is expected to reach 5 times in 2018, an increase of 400%, and the space is still large. At present, Shanghai Enjie's diaphragm shipments are the world's first, and its market share is expected to continue to rise rapidly: In 2018, Shanghai Enjie diaphragm shipments were 468 million square meters, with a global market share of 14%, ranking first. In terms of cost, Shanghai Enjie diaphragm products have strong cost control capabilities, with gross profit margin and net profit margin leading by more than 11% and 15% respectively. In terms of production capacity, Shanghai Enjie's wet process base film production capacity will reach 4 billion square meters in 2020, and production will be expanded. The scale is significantly ahead of the highest domestic rivals of 470 million square meters and the highest international counterparts of 1.95 billion square meters. The significant lead in cost and production capacity has enabled Shanghai Enjie to grasp the initiative to increase its market share. In 2019, the global market share is expected to reach more than 20%. Shanghai Enjie is the main supplier of CATL in China, and its customers abroad include LG, Samsung, American A123 and so on. At present, mainstream battery companies at home and abroad are expanding their production on a large scale, and their requirements for stable supply of raw materials from suppliers are also increasing. Shanghai Enjie is currently actively expanding its production capacity. In 2019, Zhuhai Phase II, Wuxi, and Jiangxi will be put into production one after another. It is estimated that 20 new production lines will be added throughout the year, doubling the growth. With the commissioning of the remaining production lines and the construction of overseas production lines in the next year, production capacity and output are expected to match downstream demand and achieve rapid growth. Shanghai Enjie currently has more than 1.3 billion square meters of parent roll production capacity. In 2018, Shanghai Enjie sold 153 million yuan to LG diaphragms, accounting for 11.5% of total revenue. The total value of the newly signed contract with LG in 2019 is 617 million US dollars, and the corresponding shipment is expected to exceed 1 billion square meters. According to Shanghai Enjie's shipment plan, the proportion of overseas shipments is expected to increase to 25% in 2019, of which LG will contribute a larger proportion. Shanghai Enjie previously announced that products developed in cooperation with overseas customers will be used in Hyundai and Volkswagen models. At present, there are no more than two companies that can apply domestic diaphragm products in the field of overseas electric vehicles. The signing of this large order also provides endorsement of Shanghai Enjie's technical level. Shanghai Enjie currently plans to build factories overseas, and it is expected to supply nearby overseas battery manufacturers in the future to open up global market space. In fact, overseas battery manufacturers have high requirements for product performance and price conditions are better than domestic ones. In 2019, the price of some domestic products of Shanghai Enjie has been adjusted, but the overall proportion is not large. At the same time, as the proportion of overseas customers increases, and the cost is further optimized under the effect of scale. In the industrial expansion cycle led by the leading lithium battery, diaphragm companies should keep pace with the industrial chain and follow up the expansion progress in time.