Founder: Electric car sales and battery installation continue to grow, while industry prices continue to decline. The profitability resilience of battery industry leaders remains strong.

Founder's research report states that in the first half of 2024, the production and sales of new energy vehicles at home and abroad continued to increase, while the installed capacity of power batteries in China maintained rapid growth. In terms of concentration, Contemporary Amperex Technology (300750.SZ) still holds a leading position in the field of power batteries. Due to changes in supply and demand, prices of lithium carbonate and other lithium battery materials have fallen significantly, leading to a downward trend in battery prices. Most lithium battery material companies have been impacted by the price decline, with positive electrode material companies especially affected by the high-priced lithium carbonate inventory burden, while negative electrode materials face pressure due to declining product prices. However, leading companies in the structural parts and battery fields have maintained high growth rates. New energy vehicles: Electric vehicle sales and battery installation continue to grow, industry prices continue to decline. In the first half of 2024, the production and sales of new energy vehicles at home and abroad continued to increase, while the installed capacity of power batteries in China maintained rapid growth. In terms of concentration, Contemporary Amperex Technology still holds a leading position in the field of power batteries. In the first half of 2024, the market share of the leading company in the lithium iron phosphate battery sector significantly increased, while competition in the negative electrode and separator markets became more intense. Due to changes in supply and demand, prices of lithium carbonate and other lithium battery materials fell significantly, leading to a downward trend in battery prices. In the future, as lithium carbonate prices stabilize and the price decline of other materials narrows, the rate of decline in power battery prices may slow down. Mid-term summary: Material companies' performance is generally under pressure, while battery industry leaders' profitability remains resilient. In the first half of 2024, overall revenue of lithium battery companies faced pressure, with most battery and material companies experiencing year-on-year declines, with copper foil and structural parts sectors performing relatively well. Copper foil companies benefited from the rise in copper prices in the first half of the year and the low base effect from last year, while structural parts companies benefited from smaller price declines and an increase in market share of leading companies, driving relatively stable performance in these sectors. In terms of profitability, most lithium battery material companies were impacted by the price decline, with positive electrode material companies especially affected by the high-priced lithium carbonate inventory burden, while negative electrode materials faced pressure due to declining product prices. On the other hand, battery companies benefited from the decline in lithium battery material prices and adjustments in metal price transmission mechanisms, resulting in a general increase in gross profit margin. Due to industry imbalances in supply and demand and a slowdown in end-user sales growth, the unit price of most companies' products decreased, and sales growth also slowed down, leading to a general negative growth in net profit attributable to shareholders. Lithium iron phosphate companies faced significant performance pressure due to high-priced lithium carbonate inventory and impairment losses. In comparison, leading companies in the structural parts and battery fields have maintained relatively high growth rates. Investment recommendations: On the demand side, the increase in electric vehicle penetration in the domestic market combined with the demand boost in the European market, considering the gradual improvement in the supply side layout, the supply-demand structure is expected to turn for the better. Currently, with a preference for market risk, profitability remains the core criterion, and it is recommended to focus on the battery segment and some material segment leaders with continuously improving operating rates and high barriers to entry. It is recommended to pay attention to Contemporary Amperex Technology (300750.SZ), Eve Energy Co., Ltd. (300014.SZ), Shenzhen Kedali Industry (002850.SZ), Hunan Yuneng New Energy Battery Material (301358.SZ), Guangzhou Tinci Materials Technology (002709.SZ), Zhejiang Sanhua Intelligent Controls (002050.SZ), Hongfa Technology (600885.SH), Xiamen Faratronic (600563.SH), Shenzhen Baoming Technology (002992.SZ), etc. Risk warning: Unexpected policy changes; intensified industry competition; slower-than-expected progress in the industrialization of new technologies.