20160930-三星证券-Rechargeable_batteries__China_s_shift_to_ternary_batteries__Winners_and_losers_55页_1mb

Sector Update Summary

Core Content

This report provides an analysis of the Chinese EV market and its implications for the global battery value chain, with a focus on the shift from lithium iron phosphate (LFP) to ternary batteries. It highlights the impact of this shift on Korean battery and materials firms, including Ecopro, L&F, Posco Chemtech, and Soulbrain, and outlines investment opportunities in the context of evolving market conditions.

Main Points

China's EV Market Shift

• Ternary Battery Adoption: Chinese EV manufacturers are increasingly adopting ternary batteries due to their superior energy density and performance compared to LFP batteries. This shift is expected to increase the ternary battery adoption rate from 20-30% to 70-80% in the near future.
• BYD's Move: BYD, the world's largest EV manufacturer, is planning to launch ternary battery-based EV models earlier than expected, signaling a broader industry trend.
• Subsidy Changes: The Chinese government has stopped subsidies for electric buses using ternary batteries, which has affected demand for these batteries. However, the overall EV market continues to grow, with sales increasing by over 140% year-over-year in the first seven months of 2016.

Battery Certification Challenges

• Certification Barriers: Korean battery firms face challenges in securing Chinese battery certification due to political tensions and regulatory requirements. Certification is crucial for eligibility for government subsidies.
• Certification Requirements: To qualify for certification, firms must have R&D capabilities, TS-16949 certification, and at least one year of manufacturing experience in China.
• Fifth Round of Certification: The next round of battery certification is expected in September-October 2016, assuming political tensions remain stable.

Market Implications

• Opportunities for Korean Firms: The shift to ternary batteries presents opportunities for Korean battery materials firms, particularly those involved in high-nickel NCM batteries. Companies like L&F and Ecopro are well-positioned due to their experience in producing high-nickel ternary batteries.
• Posco Chemtech: As the only Korean anode materials firm, Posco Chemtech is highlighted as a top pick due to its strong position in the market and competitive advantages in the battery value chain.
• Investment Ideas: The report suggests that the future growth of the ternary battery market will benefit certain Korean firms, especially those with expertise in high-nickel battery materials.

Key Information

Stock Performance and Valuation

• Ecopro: Target price KRW15,000 (5.6% upside), with a current price of KRW14,200.
• Posco Chemtech: Target price KRW14,000 (18.6% upside), with a current price of KRW11,800.
• Soulbrain: Target price KRW76,000 (22.2% upside), with a current price of KRW62,200.
• L&F: Current price KRW18,850.
• Iljin Materials: Current price KRW16,500.
• BYD: Current price HKD52.45.
• Guangzhou Tinci Materials: Current price CNY46.5.

Market Data and Trends

• EV Battery Demand: China's EV battery demand is expected to grow by 60% in 2016, reaching 25GWh.
• Battery Types: Ternary batteries are becoming the preferred choice for EVs due to their higher energy density and performance, even though they are currently more expensive than LFP batteries.
• Subsidy Budget Concerns: There are concerns about the adequacy of the Chinese EV subsidy budget due to faster-than-expected growth in EV sales and potential fraud in subsidy claims.

Materials Firms

• Cathode Materials: China's cathode materials production is expected to increase by 32.7% to 150,000 tonnes in 2016. Major players include Hunan Shanshan, Beijing Easpring, and BTR New Energy Materials.
• Anode Materials: BTR New Energy Materials is expanding its production capacity significantly, from 30,000 tonnes to 60,000 tonnes by early 2017. Other anode material firms like Shanshan Group and Jiangxi Zichen are also increasing their capacities.

Conclusion

The shift to ternary batteries in China presents both challenges and opportunities for Korean battery and materials firms. While certification issues remain a hurdle, the growing demand for ternary batteries is expected to drive significant growth in the battery value chain, particularly for firms with expertise in high-nickel materials. The report emphasizes the importance of understanding China's regulatory environment and market trends for investors in the sector.