Risks Behind The Rapid Expansion and High Profitability of EVE

Industrials Author: Boying Ji Apr 14, 2023 12:00 PM (GMT+8)

while we continue to pay attention to the rapid expansion of EVE, we also need to continue to pay attention to changes in the structure of corporate assets and liabilities and financing progress.

Electric car lithium battery pack and power connections

Because the bulk of the battery cost is currently mainly on the material side, while the manufacturing side accounts for a small proportion. From the perspective of cost structure splitting, the material cost of power batteries accounts for about 85%, labor accounts for 5%, and manufacturing costs account for 10%. In the future, only companies that achieve upstream integration can have a greater cost advantage in the competition.

Among the power battery enterprises, the integrated layout of Energy Very Endure (EVE) is undoubtedly at the top of the industry in terms of breadth and depth.

Since 2021, EVE has been accelerating the construction of an integrated layout. For example, EVE can not only cover mineral resources such as lithium ore, cobalt resources, and nickel resources, but also lithium battery materials such as electrolytes, separators, ternary cathodes, and copper foils by establishing joint ventures with other companies or acquiring shares. Among the second-tier lithium battery manufacturers, EVE is one of the few companies that has achieved full coverage of the industrial chain, and its layout depth is second only to CATL.

According to the company's latest information, there will be an output of more than 10,000 tons of lithium carbonate in Qinghai Dachaidan Salt Lake. If the battery sales volume is roughly 100GWh, EVE expects to control the supply of lithium resources to reach 40%-50%, which is basically the highest in the industry, and the company mainly extracts lithium from salt lakes at a lower cost.

On April 10, EVE Lithium Energy released its performance forecast for the first quarter of 2023. The forecast shows that EVE Lithium Energy will achieve a net profit attributable to shareholders of listed companies of 1.042 billion to 1.147 billion yuan in the first quarter of 2023, a year-on-year increase of 100. %-120%.

Regarding the growth of performance, EVE said that the main reasons are:

The company adheres to the high-quality development strategy, continues to increase the research and development of new technologies and new products, supports the rapid growth of the main business, and maintains a stable supply capacity as the new factory and new production line enter the mass production stage, bringing in the first quarter of 2023, operating income will increase by about 60% year-on-year.

The company adheres to a balanced development strategy and maintains a tripartite business structure of consumption, power, and energy storage batteries. Although there were some fluctuations or partial changes in the market in the first quarter, the company's overall operating results still achieved steady growth.

According to the 2022 performance report of EVE, it will achieve a total operating income of 36.305 billion yuan in 2022, an increase of 114.82% over the same period last year; the net profit attributable to shareholders of listed companies is 3.51 billion yuan, an increase over the same period last year 20.79%.

According to statistics, EVE Lithium Energy has invested in the expansion of energy storage batteries in Jingmen, Hubei, Qujing, Yunnan, Chengdu, Sichuan, Shenyang, Liaoning, and other places, with a total investment of over 36 billion yuan, and the overall planned "power + energy storage" production capacity of lithium iron phosphate over 250GWh.

Recently, Dr. Liu Jincheng, chairman of EVE Lithium Energy, said that EVE Lithium Energy's 4695 large cylindrical batteries will be mass-produced and delivered this year. At the same time, the construction of a 60GWh large iron-lithium battery super factory has also started.

In the latest research conducted by the organization, EVE said that on the one hand, downstream customers are basically not yet profitable. Therefore, as a major supplier, the company will give certain support in strategy and partly benefit downstream in terms of profits. From this perspective, the company does not pursue higher profit margins in terms of power batteries this year; on the other hand, because the company's production capacity is also expanding, it also hopes to increase its market share on the customer end.

According to statistics, since 2022, EVE Lithium Energy has announced 23 major investment project announcements, with a total investment budget of nearly 160 billion yuan. Excluding the joint investment share with other companies, its own investment is also about 110 billion yuan.

From the perspective of investment risk, while we continue to pay attention to the rapid expansion of enterprises, we also need to continue to pay attention to changes in the structure of corporate assets and liabilities and financing progress.

The core question it faces at the moment is, where does the money come from? After all, without the support of funds, no matter how good the strategy is, it is just a theory on paper.

According to statistics, while EVE continues to expand, the asset-liability ratio has soared to the highest level in history. As shown in the table below, in less than three years, the asset-liability ratio of EVE has soared by 31 percentage points. At the end of September 2022, the asset-liability ratio of EVE rose to 66.30%, an increase of 19.47 percentage points year-on-year.


In addition, compared with other major competitors of domestic lithium batteries, the financial strength of EVE is the lowest.


Although EVE's current projects are expanding rapidly and there is still a lot of pressure on capital, looking back at the growth history of EVE Lithium Energy, the company has maintained sufficient caution in terms of technical routes and customer selection, and the expansion of production capacity is not unreasonable.