The profit of the industrial chain in 2024Q1 rebounded month-on-month. The lithium battery industry chain achieved revenue of 200.72 billion yuan in 2024Q1, down 17.3% year-on-year and 22.2% month-on-month. As the price of the industrial chain fell sharply compared with the same period last year, the decline in product selling prices led to a year-on-year decline in revenue scale. The first quarter is the traditional off-season for terminal demand, and the enthusiasm of the industrial chain is not high, coupled with the continued sluggishness of the industrial chain price, the revenue scale has shrunk quarter-on-quarter. The net profit attributable to the parent company of the industrial chain in 2024Q1 was 14.31 billion yuan, a year-on-year decrease of 10.9%, a significant year-on-year decline compared with 2023Q4 (-51.8%), and a quarter-on-quarter increase of 19.5%, and the net profit rebounded quarter-on-quarter for the first time since the third quarter of last year.

The destocking has been effective, and the asset impairment loss of the industrial chain in 2024Q1 has decreased significantly compared with the previous quarter. An important reason for the month-on-month rebound in the profitability of the industrial chain in Q1 2024 is that the high-priced inventory of leading enterprises will be basically consumed by the end of 2023, and the inventory price loss in Q1 of 2024 will be greatly reduced. The total asset impairment loss of the industrial chain in 2024Q1 was -1.05 billion yuan, a year-on-year decrease of 3.41 billion yuan and a month-on-month decrease of 8.65 billion yuan. Among them, the asset impairment loss of cathode materials decreased by 2.488 billion yuan year-on-year and 3.01 billion yuan month-on-month and month-on-month respectively, the asset impairment loss of anode materials decreased by 1.26 billion yuan month-on-month, and the asset impairment loss of lithium battery equipment decreased by 600 million yuan month-on-month, all of which had a significant impact on the performance of the quarter.

The profitability of the industrial chain in 2024Q1 increased year-on-year and quarter-on-quarter. The gross profit margin of the industrial chain in 2024Q1 was 19.5%, up 1.9 pct year-on-year and up 0.8 pct month-on-month, the net profit margin was 7.4%, up 0.6 pct year-on-year and up 2.4 pct month-on-month, and ROE-dilution was 2.1%, down 0.5 pct year-on-year and up 0.3 pct month-on-month.

The inventory level in 2024Q1 is basically stable, and the inventory turnover rate is high. Since 2023, the industrial chain has been in the stage of destocking. As of the end of 2023, the total inventory balance of the industrial chain was 175.94 billion yuan, a decrease of 27% from the end of 2022. The proportion of total assets was 9.3%, a decrease of 5.1 pct from the end of 2022. As of the end of 2024Q1, the total inventory balance of the industrial chain was 176.87 billion yuan, accounting for 9.2% of total assets, basically unchanged at the end of 2023. The inventory turnover rate of the industrial chain in 2024Q1 was 0.92 times, the highest turnover rate in the same period in the past five years. With the basic consumption of high-priced inventory, this round of destocking is basically over.

In 2023Q4, the scale of projects under construction in the industrial chain decreased month-on-month for the first time in nearly three years, indicating that the pace of capacity expansion began to slow down. As of the end of 2023Q4, the total scale of projects under construction in the lithium battery industry chain was about 143.77 billion yuan, a decrease of 12.7% from the end of 2023Q3, which was the first month-on-month decline in the scale of projects under construction in the industrial chain in the past three years, indicating that the pace of capacity expansion began to slow down. As of the end of Q1 2024, the scale of construction in progress increased by 8.8% month-on-month, but the scale is still lower than the level at the end of the first half of 2023. Under the pressure of overcapacity and the continued low prices of the industrial chain, some new capacity plans have been postponed or cancelled, and the pace of capacity expansion has slowed down.