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Source: Time Weekly Author: Han Xun

Image source: Tuchong

The weakening downstream demand for lithium batteries has led to price fluctuations in upstream iron phosphate, which has directly affected the semi-annual performance of related listed companies.

Recently, Anada (002136.SZ) released its 2024 semi-annual report. During the reporting period, the company achieved operating income of approximately 979 million yuan, a year-on-year decrease of 8%; net profit attributable to shareholders of the parent was approximately 45 million yuan, a year-on-year decrease of 29.30%.

This is the first "report card" submitted by Anada after Wanhua Chemical Group Battery Technology Co., Ltd. (hereinafter referred to as "Wanhua Battery"), a subsidiary of Wanhua Chemical (600309.SH), took over in the first half of this year.

It is worth noting that Anada's accounts receivable growth in the first half of 2024 will exceed the growth in operating income, and the company's accounts receivable has shown a continuous growth trend in the past three years.

On August 2, a reporter from the Times Weekly sent an interview email to Anada Securities Department, but had not received a reply as of press time.

The decline in iron phosphate gross profit dragged down the performance

According to information, Anada was listed on the Shenzhen Stock Exchange in May 2007. The company's original main business was titanium dioxide series products. In 2015, due to the completion and production of the iron phosphate project of its holding subsidiary Tongling Nayuan Materials Technology Co., Ltd. (hereinafter referred to as "Tongling Nayuan"), the company supplied iron phosphate series products to the market. The company's main business was also changed to "titanium dioxide series products and iron phosphate series products". Titanium dioxide can be widely used in coatings, plastics, rubber, inks, papermaking, chemical fibers, daily chemicals, pharmaceuticals and other industries, and iron phosphate is mainly used in lithium iron phosphate battery materials, catalysts and ceramics.

However, judging from the sales in the first half of 2024, the decline in gross profit margin of iron phosphate has seriously dragged down Anada's performance.

According to Anada's 2024 semi-annual report, the sales volume of titanium dioxide was 51,400 tons, an increase of 3.2% year-on-year; the operating income was 715 million yuan, an increase of 9.92% year-on-year; the gross profit margin was about 11.54%, an increase of 0.03 percentage points year-on-year. The sales volume of iron phosphate was 29,500 tons, a decrease of 5.4% year-on-year; the operating income was 258 million yuan, a decrease of 35.06% year-on-year; the gross profit margin was about -4.85%, a decrease of 22.21 percentage points year-on-year.

Image source: Anada Announcement

Although Anada did not explain in detail the reasons for the "double decline" in operating income and net profit attributable to shareholders in its semi-annual report, it can be seen that the decline in sales volume and revenue of iron phosphate is the main factor leading to the decline in the performance of the listed company.

According to Tuduoduo's statistics, in the first half of 2024, the total output of titanium dioxide in the country was 2.3858 million tons, and Anada's titanium dioxide output accounted for 2.16%; according to Zeyan Information statistics, in the first half of 2024, the total output of iron phosphate positive electrode materials in the country was 857,700 tons, and Anada's iron phosphate output accounted for 3.6%.

As of June 30, 2024, the average market price of iron phosphate was approximately RMB 10,500/ton, while the average market price of ferric phosphate was RMB 11,000/ton on December 31, 2023.

Baichuan Yingfu analysts believe that the downstream iron-lithium market sentiment is not good, and the trading atmosphere in the iron phosphate market is deadlocked. "The iron phosphate market is greatly affected by the iron-lithium market, and iron phosphate companies are mostly watching the dynamics of iron-lithium companies. It is expected that the output of iron phosphate in July will be the same as that in June. There is a willingness to increase prices, but it is difficult to actually push them up. "It is expected that the transaction price of the iron phosphate market in July will be concentrated between 10,500 yuan and 11,500 yuan per ton."

Accounts receivable increased more than operating income

In addition to the downturn in its main business, Anada's asset quality has also attracted much attention from the market.

As of June 30, 2024, Anada's "notes receivable and accounts receivable" was approximately RMB 403 million, an increase of approximately RMB 155 million from the beginning of the year, and an increase of 8.63% from the first half of 2023. Among them, notes receivable were approximately RMB 32 million, a decrease of RMB 76 million from the beginning of the year, and a year-on-year decrease of approximately 19.93% from the first half of 2023; accounts receivable were approximately RMB 371 million, an increase of RMB 232 million from the beginning of the year, and a year-on-year increase of 12.08% from the first half of 2023.

It can be seen that in the first half of this year, the growth rate of Anada's accounts receivable was significantly higher than the growth rate of operating income.

Moreover, in the first half of 2024, the proportion of accounts receivable to total assets of Anada reached 18.82%, while at the end of 2023, this proportion was only 6.93%, an increase of about 11.89 percentage points. In this regard, Anada explained that "it was due to the increase in accounts receivable at the end of the period."

Wind shows that in the past five fiscal years (2019-2023), Anada's operating income increased from 1.038 billion yuan to 2.111 billion yuan, an increase of 103.37%, and a compound annual growth rate (CAGR) of approximately 19.42%; during the same period, "notes receivable and accounts receivable" increased from 107 million yuan to 248 million yuan, an increase of 131.78%, and a CAGR of approximately 23.38%.

Image source: Wind

It can be seen that in the past five years, the compound annual growth rate of Anada's accounts receivable has exceeded its operating income and is in a continuous growth trend.

As of June 30, 2024, Anada's provision for bad debts on accounts receivable was 6.36%, lower than 8.48% at the beginning of the reporting period. The reason for the reduction in the provision ratio is currently unknown.

Before 2024, Anada's controlling shareholder and actual controller were Tongling Chemical Industry Group Co., Ltd. (hereinafter referred to as "Tonghua Group") and Tongling State-owned Assets Supervision and Administration Commission.

In February 2024, Tonghua Group transferred 15.20% of Anada's equity to Wanhua Battery, a subsidiary of Wanhua Chemical, and completed the share transfer registration in April. Anada's controlling shareholder was changed to Wanhua Battery, and the actual controller was changed to Yantai State-owned Assets Supervision and Administration Commission.

After taking over Anada, Wanhua Chemical adjusted the board of directors of the listed company. Liu Junchang was appointed as the chairman of the company's seventh board of directors, Chen Yifeng as the company's director, and Zhou Yongjin as the chairman of the company's seventh board of supervisors. All three came from Wanhua Chemical. Former chairman Wu Ya, former director Dong Zeyou, and former chairman of the board of supervisors Wang Hua resigned.

Judging from its performance in the first half of the year, Anada has not yet submitted an ideal "report card" to Wanhua Chemical.

According to Zhuochuang data, the average price of titanium dioxide in July 2024 is 15,150 yuan/ton, down 84 yuan/ton from June, a decrease of -0.5%. Zhou Danlu, a basic chemical analyst at Huafu Securities, believes that this is mainly because July is still in the off-season for demand, the downstream construction coatings industry has a low operating load rate, and the plastics, papermaking, and textile industries are also in the seasonal off-season.

Liu Jingxuan, an analyst at Longzhong Information, believes that in the second half of 2024, iron phosphate and lithium iron phosphate are expected to fluctuate slightly overall, with limited room for price fluctuations. In the third quarter, the new energy market will enter its peak season, and the overall market will maintain an upward trend. After that, it is expected to operate mainly smoothly in the off-season.

For Anada’s new management, how to cross the cycle and increase profits is a question worth pondering in the second half of the year.