On November 23, Guoxuan Hi-Tech announced that its wholly-owned subsidiary, Hefei Guoxuan, and Great Wall Auto Parts Company signed the 2022 Purchasing Framework Cooperation Agreement, which determined that the total electricity delivered during 2022-2025 would not be less than 10GWh. Among them, the annual dimension of 2022 is not less than 2.5GWh. each year, both parties guarantee sufficient delivery and supply within the scope of the annual dimension, and the annual dimension is the minimum binding quantity of both parties.
The agreement states that the two sides should complete the delivery and supply of the annual dimensions of the current year by December 31 of the current year. If either party fails to complete, the unfinished party shall complete the delivery or supply of the balance by January 31 of the following year at the latest, otherwise it shall be liable for breach of contract in accordance with this Agreement. Of course, it is also mentioned that if one party's procurement or total supply fails to meet the above commitments due to changes in national policies and regulations or force majeure, the two parties shall negotiate a solution in time and reach a written supplementary agreement, in this case, the parties shall not be liable for breach of contract.
It is also worth mentioning that in order to protect the annual dimension of Great Wall Auto parts Company in 2022, Guoxuan Tech needs to invest a lot of resources in production line construction, manpower expansion, material reserves, etc., in view of this, Great Wall Auto parts Company agreed to provide resource assistance to Guoxuan Hi-Tech (including but not limited to financial and technical aspects) to support both parties to advance the layout of production capacity and protect the interests of both sides.
Guoxuan Hi-Tech said that the procurement framework agreement signed between Hefei Guoxuan and Great Wall Auto parts Company is based on the close supply and demand cooperation between the company and Great Wall Motor. It shows that Great Wall Automobile recognizes the company's R & D capability, process technology, quality management, production and supply system, and the signing of the agreement is conducive to strengthening the long-term and stable cooperative relationship between the company and Great Wall Automobile.
Since the beginning of this year, the sales of new energy vehicles have increased rapidly, and the demand for batteries has increased sharply. According to the China Automotive Power Battery Industry Innovation Alliance, the number of power batteries installed in China totaled 92.0 GWH in the first three quarters of this year, up 169.1% from the same period last year. In this situation, the installed scale of Guoxuan Hi-Tech has also been significantly improved. Data show that in the first three quarters of this year, the installed capacity of Guoxuan Hi-Tech reached 4.72 GWH, an increase of 228% over the same period last year, outpacing the growth rate of the industry. At the same time, the installed capacity exceeded that of previous years. On the other hand, the ranking of Guoxuan Hi-Tech's installed capacity has also continued to improve, from the eighth in June to the third in August. At present, Guoxuan's installed capacity has ranked in the top three for three months in a row.
Behind the continuous growth of installed capacity is the continuous improvement of Guoxuan Hi-Tech customer structure. It is reported that among the 1-9 batches of recommended catalogue models, Guoxuan Hi-Tech provides battery matching for 67 models, including leading, zero running, Great Wall and other car companies, of which 32 types of passenger cars have exceeded that of last year, accounting for 48% of the total from 20% this year.
At the same time, Guoxuan Hi-Tech continues to strengthen technology research and development and application. According to the China News, Guoxuan Hi-Tech R & D expenditure was 249 million yuan, a year-on-year increase of 55.68%. In terms of technology application, on October 25th, news from Guoxuan Hi-Tech Interactive platform showed that Guoxuan Hi-Tech has successfully installed 300Wh/kg high-specific energy batteries into passenger car batteries and achieved large-scale mass production. At present, it has been equipped with a number of medium-and high-end models.
Based on the increase in installed capacity, Guoxuan Hi-Tech revenue has increased significantly. Data show that in the first three quarters of this year, Guoxuan Hi-Tech achieved revenue of 5.725 billion yuan, an increase of 40.4 percent over the same period last year. However, in terms of profit, Guoxuan Hi-Tech's net profit in the first three quarters was 67.8305 million yuan, down 20.45% from the same period last year. In addition, the gross profit margin of Guoxuan Hi-Tech in the first three quarters also dropped to 18.3% from 25.4% in the same period last year.
For the emergence of this situation, the industry may not be surprised. In fact, from the disclosure of the three quarterly reports, including Guoxuan Hi-Tech, BYD, Yiwei Lithium Energy, etc., the gross profit margin of battery enterprises has declined. The reason is that this has a lot to do with the tightening of upstream supply and rising prices under the sudden increase in battery demand. Relevant data show that this year, in addition to lithium iron phosphate, ternary, electrolytes and other main materials, the price of auxiliary materials has reached or more than doubled compared with the beginning of the year.
Of course, in this context, we can see that Guoxuan Hi-Tech is further improving the layout of the industrial chain. At present, Guoxuan Hi-Tech has a layout in the fields of lithium ore, positive electrode, positive precursor, negative electrode, diaphragm, electrolyte and so on. Among them, in August this year, Guoxuan Hi-Tech invested 100000 tons of lithium carbonate project in Yichun, and the first phase is scheduled to be completed and put into production by the end of 2022. According to the progress of construction, it is expected to be put into production in small quantities in the fourth quarter of this year.
Industry insiders said that lithium carbonate is the main force in the price increase of battery raw materials this year. After Guoxuan Hi-Tech Yichun Lithium Carbonate Project is put into production, it can achieve convenient access to upstream lithium resources, further reduce costs and help the company recover its profitability.
In the procurement agreement signed with Great Wall Auto parts Company, Guoxuan Hi-Tech also said that if the agreement is fully implemented, it will have little impact on the company's operating results in 2021, but it will have a positive impact on the company's operating results in the relevant years in the future.
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