---
title: "CATL: \"The current gross profit margin is at a reasonable level\" (minutes)"
type: "Topics"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/topics/4376229.md"
description: "Our overall unit gross profit expectations for this year are better than in 2022, and the decline in lithium carbonate prices gives us more control."
datetime: "2023-03-10T05:32:34.000Z"
locales:
  - [en](https://longbridge.com/en/topics/4376229.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/4376229.md)
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author: "[Dolphin Research](https://longbridge.com/zh-CN/news/dolphin.md)"
---

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# CATL: "The current gross profit margin is at a reasonable level" (minutes)

**I. Management Statement of Key Information**

Revenue for the reporting period was RMB 328.59 billion; net profit was RMB 30.73 billion, a year-on-year increase of 92.89%; in Q4, total revenue was RMB 118.25 billion, net profit attributable to the parent company was RMB 13.14 billion; comprehensive gross margin was 22.6%.

In 2022, the company invested RMB 15.5 billion in research and development, with 16,000 R&D personnel.

Annual sales of power batteries were 289 GWh, a year-on-year increase of 116.6%; among them, power battery systems accounted for 242 GWh, with a global market share of 37%, and energy storage accounted for 43.4% of the market share for the year.

**In terms of technological research and development,** the company continued to push for updates, and released the third-generation CTP Kirin battery. Non-thermal diffusion technology has been recognized by many domestic and foreign customers and is being promoted in groups; a variety of products based on longevity cell technology and liquid cooling technology were introduced for energy storage batteries.

**For overseas customers,** in the field of power batteries, it has deepened cooperation with Ford, Honda, BMW, and others; energy storage batteries have been used in important energy storage projects in the United States, Italy, and other countries.

**Regarding capacity expansion:** **Battery production at the German overseas factory was realized, and the second factory in Hungary is planned to have a production capacity of 100 GWh**; the company's next-generation super strand was successfully put into production, significantly increasing its single-line production capacity compared with the previous strand;

**Regarding metal resources:** The company further improved its mineral resource layout through self-mining, investment, joint venture, cooperation, and recycling. Progress has been made in lithium resources in Yichun, Jiangxi, Snowy Mountain, Sichuan, and Bolivia's salt lake project, while nickel resources in Indonesia have been jointly developed to form a complete industry chain project.

Other businesses: The company promotes business models such as battery swaps and shared energy storage through innovative commercial models. During the reporting period, the chocolate battery swapping block achieved mass production and has been launched in Xiamen, Hefei, Guiyang and other cities. The company's MTB technology was first applied to the heavy-duty battery swapping project of State Power Investment Group. The company invested in the establishment of Time Electric Ship, promoting electrification in the shipping industry. In addition, the company participated in the electricity service market through multiple 100 MW-hour-level energy storage projects such as Fujian Xiapu and Datong in Shanxi through cooperation with State Grid Time Investment.

**II. Analyst Q&A**

**Q1: What is the target for energy storage and power batteries in 2023, and what is the trend of profitability?**

A1: In 2023, the growth trend of both power batteries and energy storage in the Chinese market is obvious and has a broad space. Sales of new energy vehicles in 2022 were 6.88 million, and the growth prospect is clear. The cost of new energy vehicles will be improved this year, which will be advantageous for the company, which has economies of scale.

The growth rate of energy storage is also very fast, and the situation is optimistic this year.

**Q2: What is the progress of the company's cooperation with Ford and the specific form of benefit sharing?**

A2: The specific way of cooperation with Ford is still under negotiation and promotion, and further details of the specific agreements will be shared later.

**Q3: What is the pricing strategy?**

A3: Recent price disturbances for gasoline vehicles are more based on the pressure brought by National VI B implementation. Electric vehicles are a new thing and are inherently decreasing in price. **The cost of new energy vehicles will improve this year, so it will tend to reduce prices**. **Q4: What is the recent feedback from customers regarding the lithium ore rebate? How many customers are using this strategy? How much in-house lithium ore do we have?**

A4: We have been negotiating with customers to provide benefits to downstream clients. Negotiations are a process, so we will continue to see some customers come on board gradually.

**Q5: What impact will the rectification of the Yichun Lithium Mine have on us?**

A5: The rectification mainly targets local illegal mining activities. Our company operates legally and in compliance, so the rectification has little impact on our company and other large local enterprises.

**Q6: What are the possible pricing models for domestic and foreign customers?**

A6: Each customer has a different pricing model, so it is difficult to generalize.

**Q7: What is the unit gross profit this year?**

A7: The unit gross profit is determined by unit price and cost, but there is a lot of uncertainty to predict this year's situation at present. Overall, we expect this year to be better than 2022, as the decline in lithium carbonate prices gives us more control.

**Q8: Is there any political risk involved in our cooperation with Ford? What are our next steps if this cooperation does not succeed?**

A8: From a commercial perspective, the plan is still being promoted and the progress has been smooth.

**Q9: What is covered in the lithium battery materials recovery and mineral resource business?**

A9: This year, two categories were added: battery material recovery and battery mineral-related resources. Mineral resources refer to the company's mineral layout and will be separated as the business is realized, including products related to smelting.

The battery recycling business is the recycling of battery-related materials.

**Q10: In the fourth quarter of last year, the inventory decreased. From an internal structure perspective, the battery link was in a de-stocking state. What is our inventory de-stocking level now, and what is the devaluation situation of raw materials that have fallen in Q1?**

A10: The battery is affected seasonally in the first quarter (the off-season). Material procurement in the fourth quarter will be adjusted based on production arrangements in the first quarter. Therefore, material procurement in the fourth quarter will be slightly lower.

In addition, due to the decline in lithium carbonate prices, we have adopted a strategy of de-stocking and shortening the procurement cycle. Our inventory cycle is relatively short, and the devaluation impact is relatively small.

**Q11: The proportion of other business revenue in the fourth quarter has decreased, and the overall gross profit margin is relatively high. What are the general split patterns between quarters?**

A11: Other business income mainly includes income from technology licenses, service fees, and sales of remaining materials.

Service income is relatively related to business expansion and is divided into peak and off-peak seasons according to the research and development and labor provided.

Technology licenses are a medium- to long-term license, with linear calculations each month.

Projects under development are calculated on a project-by-project basis, and income from remaining materials is related to production, so the more we produce, the more waste disposal we will have.

The quarters are generally related to the rhythm of production and sales. Overall, income from remaining materials and technology licenses accounts for a relatively high proportion of over 90% of the other income, providing sustainable revenue. **Q12: Where is the difficulty in the super-pull line, and what is your view on the 4680 technology route?**

A12: The extreme limitation of the pull line lies in high efficiency, safety, and low cost. In addition, the introduction of a large number of convenient means of communication, with a high degree of intelligence, has been gradually applied since last year and has gradually promoted the improvement of efficiency and yield. The core technology is developed by ourselves and cannot be imitated by other companies.

As for the battery route, we can also make the 4680, but the square of Kirin is a better solution because of higher energy density. Objective 4680 is also feasible and we can provide different solutions according to customer needs.

Q13: The annual report has disclosed that the inventory is about 3-6 months in 21, within 3 months in 22, how is the inventory trend this year?

A13: The first quarter is the off-season for sales. At the same time, we set up a inventory management committee from 22, which can reduce inventory level through management. We will reserve some strategic inventory, and the price of lithium carbonate will return. Our inventory has been continuously shortening the cycle and improving efficiency through inventory management.

Q14: How is the net liquidation value of inventory calculated? Is lithium carbonate priced quarterly or annually? How is the net liquidation value of finished products calculated?

A14: What has been delivered has already signed the contract and will not change much. For semi-finished products and materials, we calculate the net liquidation value by taking the average cost and the average price of the last month.

Q15: Is the cost calculation based on the average or first-in, first-out method?

A15: Rolling weighted average.

Q16: What percentage of our lithium demand is accounted for by lithium mining assets? What is the ideal self-supply ratio?

A16: Our own lithium mine is to ensure the stability and safety of the supply chain. In recent years, we have been laying out upstream. It is mainly to reduce the risk of large material price fluctuations for battery costs and there is no specific proportion.

Selling is because we see some lithium carbonate prices falling and we have some commercial considerations.

Q17: How do you consider the subsidy and specific cooperation mode with Ford?

A17: Their subsidies are their own affairs, and the relationship with us is not related to the rules formulated by the United States. The cooperation model is that Ford invests, we provide technology authorization and operation management.

Q18: For the stored goods that have not yet been included in the income calculation, will it be included in Q2 income?

A18: Ningde's revenue exceeded 300 billion last year, and every fourth quarter is a peak season, with a turnover of over 30 billion every month. The delivery settlement cycle generally has 20-30 days, and we generally include it in the next month's income.

Q19: Faced with the continuous release of upstream production capacity and increasing competition, what is your strategy for 2023?

A19: There has been excess production capacity for so many years, but high-quality production capacity is scarce. Now the competition has gone from product to comprehensive competition. The advantage of battery product performance and manufacturing, the advantage in the supply chain, is actually the formation of our core competitiveness. Our competitive advantage in the industry should be constantly expanding. Q20: What is the guidance for the delivery time and quantity of the core new products, Kirin battery, Sodium-ion battery, and M3P?

A20: Both the Sodium-ion battery and M3P are ready for mass production and delivery this year. The specific quantity depends on the sales situation of customers in the market.

Q21: What is the current utilization rate of production capacity by the end of 2023?

A21: The company has always adopted a moderate expansion strategy that is appropriate for the expanding demand. Both the product sales and production capacity increase annually, and we update the demand dynamics on a rolling basis. Therefore, the capacity utilization rate is still at a high level.

Q22: When will the inventory go out of stock this year?

A22: Goods are shipped after the contract is signed with the customer, and it doesn't affect us much after they are on the road. This year, inventory management will be maintained at a reasonable level.

Q23: Can the cooperation model with Ford be replicated? Are there any other ways to seek controllable mass production under the current US policy?

A23: The cooperation with Ford is an innovative model that many overseas customers are interested in and have discussed with us. This is a good thing for us. Our cooperation with Ford reflects our technological strength. We will weigh other options, but there is indeed no unique way.

Q24: What is the outlook for the cost of Sodium-ion battery?

A24: The cost advantage of Sodium-ion battery is still apparent now. The cost may increase with the arrival of the supply chain. But Lithium carbonate prices are still falling, and overall, the cost is still advantageous.

Q25: Musk believes that Lithium and iron compound batteries are mainstream. What do we think?

A25: Tesla also underwent a process of selecting changes, and it was also cylindrical and ternary before. We were the first to make an iron-lithium square cell for Tesla, so Tesla also benefited from our advantage in battery procurement.

In addition, we have different products for different grades and ranges. We also have M3P and Sodium-ion products, and with gradual scaling up, the subdivision direction will gradually emerge. Our current layout is also based on this consideration, and we have different structures, such as Kirin, Chocolate swappable battery, and CTC chassis, all of which satisfy various customer demands.

Q26: Are major cylindrical cells mostly ternary? Are Sodium-ion cells square?

A26: Sodium-ion batteries are all square. Cylindrical cells can be made of ternary and lithium iron phosphate.

Q27: What is the shipment confirmation situation for Q4? Will the profit recovery of power and energy storage be repaired by several points in Q4? Is the sales rebate confirmed for the power part in Q4? Can the 25-point gross profit margin of energy storage be the average level for the whole year?

A27: Sales should be 100GWh, achieving a new quarterly high. The gross profit margin has been significantly repaired in Q4, and after the scale of sales, the release of the previous price negotiation mechanism, the gross profit margin is currently at a reasonable level.

Q28: The European local law may also require upstream raw materials. How does the company consider the progress of the European local supply chain?

A28: Since the establishment of the factory in 2018, the upstream supply chain companies have also successively established factories in Europe. There is a requirement for the establishment of factories in Europe for the four major upstream main materials and equipment links. Q29: Regarding overseas income this year, has there been a significant increase in production in Germany and Hungary?

A29: **There is no doubt that Germany will increase production in 2023**, while Hungary still needs some time.

**Risk disclosure and statement of this article:** [Dolphin Research Risk Disclaimer and General Disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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