On March 12, the prospectus of Ningde Times was updated, including detailed financial figures from 2017. Recently, Foxconn’s fast-track listing process was seen as a model for industrial unicorns going public, and Ningde, often dubbed the “lion of the lithium battery industry,†has also drawn high expectations.
If Ningde can follow in Foxconn’s footsteps, its time to market could be cut from 1-2 years down to just a few months, which is definitely a big win for investors. Indeed, after the latest update, several related concept stocks saw significant surges in trading activity.
Some of these concept stocks have even issued statements expressing their readiness to "support" Ningde during its IPO. However, Ningde itself remains relatively low-key, and the updated prospectus has revealed some underlying concerns that investors should take note of.
**Performance Affected by Policy**
The prospectus shows that Ningde's net profit attributable to shareholders of the parent company in 2015, 2016, and 2017 was 931 million, 3.022 billion, and 3.972 billion yuan respectively. The year-on-year growth rates were 224.6% in 2016 and 31.44% in 2017, maintaining a strong growth trajectory.
In 2017, the company's operating revenue reached 19.997 billion yuan, up 34.4% from the previous year, matching the growth in net profit. However, when excluding non-recurring gains and losses, the net profit dropped to 2.47 billion yuan, a 16.47% decline compared to 2016.
Although the report doesn’t explicitly explain the drop, many analysts and investors believe it's linked to the sharp reduction in government subsidies for new energy vehicles. The prospectus itself hints at the risks posed by policy changes in the new energy vehicle sector.
Another indicator is the proportion of power battery system revenue in total sales. In 2015, 2016, and 2017, this segment accounted for 87.98%, 95.55%, and 87.01% of total revenue, showing its critical role in the company’s business.
Meanwhile, the gross profit margin for the company fell from 43.7% in 2016 to 36.29% in 2017, despite a significant increase in power battery sales. Analysts attribute this drop partly to the subsidy cuts, which led to a 25%-30% price drop in power batteries in 2017, with further declines expected in 2018.
**Future Risks in the New Energy Sector**
Despite the current popularity of electric vehicles, concerns about the long-term sustainability of the industry are growing. These risks could soon affect Ningde as well.
According to the prospectus, once the “Ningde Huxi Lithium-ion Power Battery Production Base Project†becomes operational, the company will add 24GWh of production capacity—more than double its 2017 sales volume. By 2020, total production capacity is expected to reach 50GWh.
This rapid expansion mirrors a trend across the entire industry. In 2018 alone, China’s power battery capacity was expected to exceed demand by 257%, with overcapacity persisting until 2025.
At the same time, rising raw material prices are squeezing margins, while car manufacturers continue to pressure battery suppliers on pricing. Competition is intensifying, with rivals like BYD and Guoxuan Hi-Tech posing a serious threat.
Moreover, questions remain about whether electric vehicles can truly replace traditional fuel cars. Some analysts point out that lithium and cobalt—key resources for batteries—are scarcer than oil, and China lacks sufficient domestic reserves. Even with the growth of electric vehicles, reliance on foreign resources may still persist.
In China, the new energy sector is heavily policy-driven. Any shift in government support could pose a major risk to companies like Ningde, which have been heavily backed by state policies.
While Ningde currently holds a leading position in the industry, the market value of BYD, which operates across the entire automotive and battery sectors, exceeds 80 billion yuan. Can Ningde sustain a valuation of over 130 billion yuan? Only time—and its successful listing—will tell.
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