Influenced by trend of the whole market, new energy vehicle sector showed sluggish performance and new energy vehicle index consolidated over the past half year. But it is learnt that the sector is favored by institutional investors now again. For institutions, as the new energy sector boasts huge development potential and real demands and new model of Tesla is expected to hit the market, investment opportunities are coming. Institutions are rosy about companies leading in lithium mineral resource industry which will surely benefit from the investment opportunities.
Investment opportunities come again
Seen from performance of new energy vehicle sector in the secondary market, concept stocks such as Tianqi Lithium Corporation, Guangzhou Tinci Materials Technology Co., Ltd., Beijing Easpring Material Technology Co., Ltd. and Zhejiang Huayou Cobalt Co., Ltd. performed brilliantly from the third quarter of 2015 till the first half of last year. But due to cheat on subsidies and dragged by the overall market, except Zhejiang Huayou Cobalt and Nuode Investment Co., Ltd. that became strongly, most individual stocks showed flat performance since the second half of last year and many investors retreated from the market.
It is found that as the list of promoting recommended models of new energy vehicles and the list of new energy vehicles exempt from vehicle purchase tax were introduced and policies on local subsidies were carried out gradually, new energy vehicles continued to witness good sales. Upstream sector of new energy vehicle industry is being favored by institutional investors again.
According to a research report of Lianxun Securities, new energy passenger vehicle sales recorded 29,222 units in April, up by 41 percent year on year and by 6 percent when compared with that in March. As some policies related to new energy vehicles will be gradually put in place and slack season for new energy vehicles ends, new energy vehicle sales will grow faster in the whole year. 334 new energy models are included in the latest announcement released by the Ministry of Industry and Information Technology (MIIT).
In the opinion of a private fund manager, industry insiders predicted that point redemption scheme for new energy will be adopted. Oil consumption of automobile manufacturers and production and sales of new energy vehicles will be assessed based on point redemption for oil consumption and new energy respectively, which will greatly beef up the new energy trend for cars all over the world. The number of new energy vehicles accounted for only about 1 percent of total cars in the world in 2016 and the percentage is expected to climb to above 20 percent by 2025. In terms of market performance, some companies have showed explosive development. In spite of current sluggish situation, there is still certain safety margin for valuation.
Optimisticabout lithium mineral resource industry
It is learnt that institutions are most rosy about companies engaged in lithium mineral resource industry. In the eyes of institutions, the explosive development of the whole market will bring huge demand for lithium mineral resource, which will benefit the companies which have many lithium mineral resources at hand and have pricing power.
In the opinion of the above-mentioned private fund manager, if development trend of new energy vehicle industry is confirmed, companies engaged in lithium mineral resource will most certainly gain benefits. In terms of market demand and resource supply, industry insiders thought that short supply of mineral will lead to tight balance of lithium resource. High prices of lithium hydrate and lithium carbonate and expectation on increasing prices will bring generous profits to relevant companies. According to TF Securities, production of new energy vehicles in China and foreign countries will grow remarkably in the third and fourth quarters of this year. As demand for lithium salt saw growth 3 months ahead of growth in new energy vehicle, it is in short supply now. So price of lithium salt will start to rise continuously again.
Earnings of listed companies specialized in lithium mineral resource skyrocketed. Net profits of Tianqi Lithium Corporation increased by over 5 times year on year to 1.512 billion yuan in 2016. Net profits of Jiangxi Ganfeng Lithium Co., Ltd. recorded 460 million yuan last year, an increase of 2.7 times year one year. According to the first quarterly report of private funds companies in 2017, 97 funds and 83 funds hold huge positions in Tianqi Lithium Corporation and Jiangxi Ganfeng Lithium respectively.
Translated by Vanessa Chen
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