The key technology of the electric vehicle revolution, but its ability to make money is surprising.
The integrated die-casting sector, which has risen by 20% in the past month, has ushered in a sharp pullback since August.
Close on August 5, the integrated die-casting sector generally fell, among which Xusheng shares fell by 7.63%, while Heli Technology and Ruihu Molds fell by more than 5%.
Contrary to the market trend, 180 institutions have conducted intensive research on Lizhong Group this week, becoming one of the most watched listed companies.
As the leader in heat-free aluminum alloy materials, Lizhong Group expects that heat-free alloys will enter a stage of rapid development in 2023 and enter the market explosion period from 2024 to 2026.
However, Lizhong Group, which had revenue of 10 billion yuan in the first half of the year, had a net profit of only 277 million yuan, and its gross profit margin also declined from 20.16% in 2020 to 8.94% in mid-2022.
In addition, in 2021, the average operating cost ratio of 24 integrated die-casting concept stocks was as high as 98%.
While the cost is high and profit is under pressure, what barriers exist in the integrated die-casting industry chain? Which link has the strongest profitability?
01
Car companies are striving to lay out the "efficiency monster"
In this era when efficiency is king, integrated die-casting came into being.
The traditional body manufacturing process adopts stamping-welding-coating-coating-to-final assembly process. Integrated die-casting is to redesign and highly integrate multiple separate and dispersed small pieces, and use a large die-casting machine to form them in one go, directly obtaining a well-organized "Lego".
In 2019, Tesla took the lead in setting a precedent for large-scale high-pressure casting. In September 2020, Tesla mass-produced the technology in the Model Y rear floor. In May 2021, Tesla's front cabin assembly was successfully developed and was applied to the Model Y model in October.
In terms of quantity, the Model Y produced by the Texas factory can simplify the previous 171 independent parts into 2 large die-cast single parts, reducing more than 1,600 welding points.
In terms of time, it takes less than two minutes to die-cast a large integrated die-casting machine to die-cast at least two hours a day, and can produce 1,000 castings a day. In traditional technology, stamping and welding 70 parts to assemble a component, it takes at least two hours.
Faster production pace, less manpower and equipment make Tesla's Model Y the most sold electric car model in the world. In the first half of 2022, Tesla delivered more than 310,000 Model Ys to consumers.
In addition, integrated die-casting technology has two major "weapons": weight reduction and cost reduction.
Lightweight is one of the important means for electric vehicles to improve their range, and it can also help fuel vehicles reduce fuel consumption and bring about improvements in acceleration, braking and handling. It is reported that Tesla's new generation of integrated die-cast chassis is expected to reduce the weight of the vehicle by 10%, and the corresponding range will increase by 14%.
In addition, the application of integrated die-casting technology can reduce costs such as production, land, and labor. For example, Tesla's rate of using integrated die-cast rear floors has a manufacturing cost of 40% lower than before.
CITIC Securities mentioned that taking the battery capacity of ordinary electric vehicles with an average electric vehicle as an example, if the integrated die-cast body is used to reduce weight and ensure the continuous mileage remains unchanged, the battery capacity can be reduced by about 10kwh. Calculated based on the cost of lithium iron phosphate battery pack of 800 yuan/kwh, the cost can be reduced by 8,000 yuan.
In the first half of 2022, the domestic production and sales of new energy vehicles reached 2.661 million and 2.6 million respectively, an increase of 1.2 times year-on-year. As the downstream demand explodes, it will inevitably be accompanied by a technological revolution and efficiency revolution.
Tesla plans to integrate the body into 9 parts in the future through integrated die casting. Under the catfish effect, new domestic car-making forces, and even some traditional powerful people, have begun to develop and deploy new manufacturing processes.
In December 2021, the rear floor of NIO ET5 was the first to use integrated casting technology to achieve a weight reduction of 30%, and the trunk space increased by 11L. Car companies such as Xiaopeng, Gaohe, Volvo, Volkswagen, and Mercedes-Benz have also made some arrangements.
02
High cost Material manufacturers only earn hard money
For car companies, integrated die-casting technology is undoubtedly a "hot commodity". However, for other manufacturers in the industrial chain, the money-making ability of integrated die-casting does not seem to be as strong as imagined.
The upstream of the integrated die-casting industry chain is a manufacturer of raw materials, equipment and molds; the midstream is a manufacturer with die-casting technology; the downstream is a vehicle manufacturer that uses integrated die-casting parts.
Picture/Integrated die-casting industry chain
From the perspective of technical hardware, technical barriers are mainly concentrated in four aspects.
In terms of materials, unlike the heat treatment of traditional processes, the integrated die-casting process requires cooling treatment during the processing of metal materials, so it depends on heat-free aluminum alloy materials.
In terms of equipment, integrated die-casting has high requirements for the mold locking force of the die-casting machine. Tianfeng Securities mentioned that it will take at least one year from ordering to installation and commissioning of large die-casting machines. At the same time, the 6,000T die-casting machine, which is currently widely used, has a single set of prices of tens of millions of yuan, which has created a high capital barrier.
In terms of molds, the parts and structure of integrated die-casting are complex, with high manufacturing costs and long preparation periods, so higher requirements are put forward for the temperature balance and strength of die-casting molds.
In terms of process, since integrated die-casting technology is in its infancy, die-casting vendors need to have rich experience in production processes and technical accumulation to ensure the yield rate of mass production. It is necessary to accumulate enough experience to establish a Know-How system.
However, from the perspective of profitability, the ability to make money in each link is not outstanding.
Figure/Integrated die-casting concept stocks 2021 profit data
According to statistics based on the integrated die-casting concept stocks screened out by Tonghuashun, the average sales gross profit margins of material suppliers, molds, die-casting equipment, and die-casting factories are 13.96%, 20.85%, 31.86%, and 21.37%, respectively.
In addition, whether it is upstream materials, molds, equipment, or midstream die casting factories, they have one common feature - high costs. In 2021, the average operating cost ratio of 24 integrated die-casting concept stocks was as high as 98%. Among them, Chunxing Precision has the highest operating cost rate in 2021 of 126.82%, gross sales profit margin of 10.81%, and net sales profit margin of -41.31%.
Figure/Integrated die-casting concept stocks top ten operating cost rates in 2021
The operating cost rate is high, firstly, the equipment is expensive, and secondly, the material procurement cost is large.
The integrated die-casting industry chain is mostly heavy asset enterprises. In addition, die-casting companies also have to purchase expensive large die-casting machines. Currently, the price of a 7000T die-casting machine is about RMB 60-70 million, and its service life is about 15 years.
At the same time, the rising prices of raw materials and the high manufacturing costs have also increased costs. Taking Wencan Co., Ltd. as an example, raw materials account for nearly 57% of the total cost, manufacturing costs account for about 31%, and labor costs account for about 12%.
Recently, Lizhong Group, the leader in heat-free aluminum alloy materials, released its interim report. In the first half of 2022, the company's revenue was 10 billion yuan, a year-on-year increase of 16%; but its net profit was only 277 million yuan, a year-on-year increase of 0.54%. In addition, gross profit margin has also declined from 20.16% in 2020 to 8.94% in mid-2022.
Why is the profit margin so low? Judging from last year's annual report and this year's interim report, it is mainly due to the inverted aluminum prices at home and abroad, the rise in metal silicon prices, and the increase in sea freight fees, which has led to a decline in profitability.
Overall, the profitability of equipment manufacturers is slightly higher than that of raw materials, molds and processing steps.
03
The industry space reaches 240 billion
Equipment manufacturers may take the lead in earning
Tianfeng Securities believes that in the future, except for the cover parts, the stamping and welding links of other body structural parts may be replaced by the die-casting process.
According to CITIC Securities, the penetration rate of integrated casting worldwide is expected to reach 30% by 2030. It is conservatively estimated that the supporting value of bicycles is expected to reach 10,000 yuan, and the space of the integrated die-casting industry is above 240 billion yuan, with a CAGR of 80% in 10 years.
"Equipment companies that actively deploy large die-casting machines are expected to be the first to enjoy the industry dividends." AVIC Securities pointed out that large die-casting machines are the core equipment of integrated die-casting, with high technical barriers in production technology and experience. At present, only a few manufacturers such as Lijin Technology and Yizhimi have delivery capabilities. Under the development trend of lightweight automobiles, downstream automakers have accelerated their layout of integrated die-casting technology, and some have entered the bidding stage, while upstream equipment production capacity is limited, so equipment manufacturers may take the lead in making profits.
For the future market space of integrated die-casting machines, Minsheng Securities calculates that according to the difficulty of die-casting, assuming that the order of integrated die-casting instead of stamping-welded structural parts should be the rear floor-front floor-middle floor, it corresponds to the requirements of 7000T, 8000T, and 12000T die-casting machines, and assuming that the mass production time of integrated die-casting of front floor and middle floor is 2023 and 2025 respectively. In addition, the mold has certain consumable properties and needs to be replaced regularly. Therefore, assuming that the life of the 7000T, 8000T and 12000T die-casting molds is 6, 50,000, and 40,000 molds respectively.
Minsheng Securities predicts that by 2025, the global market size of pure electric vehicle floor plate integrated die-casting machines will be about 5.5 billion yuan and the mold market size will be 900 million yuan; by 2030, the global market size of pure electric vehicle floor plate integrated die-casting machines will be about 19.3 billion yuan and the mold market size will be 5.1 billion yuan.
In addition, multi-link layout in the integrated die-casting track is also an important means to gain a foothold in the wind.
Guangdong Hongtu is one of the leaders in the domestic die-casting industry. In addition to being the first to deploy the world's first 12,000T die-casting equipment, it also advances simultaneously in the research and development of materials, processes and technology. In terms of material research and development, the company has successfully developed heat-free treatment materials, high-strength and high-tough aluminum alloy materials, and new light-transmitting polymer materials; in terms of process research and development, it actively promotes ultra-large integrated die-casting of front cabins, rear floors and battery pallets; in terms of technology research and development, it continues to carry out mold supporting design technology, mold cooling optimization and control technology, etc.
In the first half of 2022, Lizhong Group and Wencan Co., Ltd. signed a "Strategic Cooperation Framework Agreement", establishing a strategic cooperative relationship in the fields of material development and process application of large-scale integrated body structural parts of new energy vehicles, integrated cast battery box boxes and other products.
02
High cost Material manufacturers only earn hard money
For car companies, integrated die-casting technology is undoubtedly a "hot commodity". However, for other manufacturers in the industrial chain, the money-making ability of integrated die-casting does not seem to be as strong as imagined.
The upstream of the integrated die-casting industry chain is a manufacturer of raw materials, equipment and molds; the midstream is a manufacturer with die-casting technology; the downstream is a vehicle manufacturer that uses integrated die-casting parts.
Picture/Integrated die-casting industry chain
From the perspective of technical hardware, technical barriers are mainly concentrated in four aspects.
In terms of materials, unlike the heat treatment of traditional processes, the integrated die-casting process requires cooling treatment during the processing of metal materials, so it depends on heat-free aluminum alloy materials.
In terms of equipment, integrated die-casting has high requirements for the mold locking force of the die-casting machine. Tianfeng Securities mentioned that it will take at least one year from ordering to installation and commissioning of large die-casting machines. At the same time, the 6,000T die-casting machine, which is currently widely used, has a single set of prices of tens of millions of yuan, which has created a high capital barrier.
In terms of molds, the parts and structure of integrated die-casting are complex, with high manufacturing costs and long preparation periods, so higher requirements are put forward for the temperature balance and strength of die-casting molds.
In terms of process, since integrated die-casting technology is in its infancy, die-casting vendors need to have rich experience in production processes and technical accumulation to ensure the yield rate of mass production. It is necessary to accumulate enough experience to establish a Know-How system.
However, from the perspective of profitability, the ability to make money in each link is not outstanding.
Figure/Integrated die-casting concept stocks 2021 profit data
According to statistics based on the integrated die-casting concept stocks screened out by Tonghuashun, the average sales gross profit margins of material suppliers, molds, die-casting equipment, and die-casting factories are 13.96%, 20.85%, 31.86%, and 21.37%, respectively.
In addition, whether it is upstream materials, molds, equipment, or midstream die casting factories, they have one common feature - high costs. In 2021, the average operating cost ratio of 24 integrated die-casting concept stocks was as high as 98%. Among them, Chunxing Precision has the highest operating cost rate in 2021 of 126.82%, gross sales profit margin of 10.81%, and net sales profit margin of -41.31%.
Figure/Integrated die-casting concept stocks top ten operating cost rates in 2021
The operating cost rate is high, firstly, the equipment is expensive, and secondly, the material procurement cost is large.
The integrated die-casting industry chain is mostly heavy asset enterprises. In addition, die-casting companies also have to purchase expensive large die-casting machines. Currently, the price of a 7000T die-casting machine is about RMB 60-70 million, and its service life is about 15 years.
At the same time, the rising prices of raw materials and the high manufacturing costs have also increased costs. Taking Wencan Co., Ltd. as an example, raw materials account for nearly 57% of the total cost, manufacturing costs account for about 31%, and labor costs account for about 12%.
Recently, Lizhong Group, the leader in heat-free aluminum alloy materials, released its interim report. In the first half of 2022, the company's revenue was 10 billion yuan, a year-on-year increase of 16%; but its net profit was only 277 million yuan, a year-on-year increase of 0.54%. In addition, gross profit margin has also declined from 20.16% in 2020 to 8.94% in mid-2022.
Why is the profit margin so low? Judging from last year's annual report and this year's interim report, it is mainly due to the inverted aluminum prices at home and abroad, the rise in metal silicon prices, and the increase in sea freight fees, which has led to a decline in profitability.
Overall, the profitability of equipment manufacturers is slightly higher than that of raw materials, molds and processing steps.
03
The industry space reaches 240 billion
Equipment manufacturers may take the lead in earning
Tianfeng Securities believes that in the future, except for the cover parts, the stamping and welding links of other body structural parts may be replaced by the die-casting process.
According to CITIC Securities, the penetration rate of integrated casting worldwide is expected to reach 30% by 2030. It is conservatively estimated that the supporting value of bicycles is expected to reach 10,000 yuan, and the space of the integrated die-casting industry is above 240 billion yuan, with a CAGR of 80% in 10 years.
"Equipment companies that actively deploy large die-casting machines are expected to be the first to enjoy the industry dividends." AVIC Securities pointed out that large die-casting machines are the core equipment of integrated die-casting, with high technical barriers in production technology and experience. At present, only a few manufacturers such as Lijin Technology and Yizhimi have delivery capabilities. Under the development trend of lightweight automobiles, downstream automakers have accelerated their layout of integrated die-casting technology, and some have entered the bidding stage, while upstream equipment production capacity is limited, so equipment manufacturers may take the lead in making profits.
For the future market space of integrated die-casting machines, Minsheng Securities calculates that according to the difficulty of die-casting, assuming that the order of integrated die-casting instead of stamping-welded structural parts should be the rear floor-front floor-middle floor, it corresponds to the requirements of 7000T, 8000T, and 12000T die-casting machines, and assuming that the mass production time of integrated die-casting of front floor and middle floor is 2023 and 2025 respectively. In addition, the mold has certain consumable properties and needs to be replaced regularly. Therefore, assuming that the life of the 7000T, 8000T and 12000T die-casting molds is 6, 50,000, and 40,000 molds respectively.
Minsheng Securities predicts that by 2025, the global market size of pure electric vehicle floor plate integrated die-casting machines will be about 5.5 billion yuan and the mold market size will be 900 million yuan; by 2030, the global market size of pure electric vehicle floor plate integrated die-casting machines will be about 19.3 billion yuan and the mold market size will be 5.1 billion yuan.
In addition, multi-link layout in the integrated die-casting track is also an important means to gain a foothold in the wind.
Guangdong Hongtu is one of the leaders in the domestic die-casting industry. In addition to being the first to deploy the world's first 12,000T die-casting equipment, it also advances simultaneously in the research and development of materials, processes and technology. In terms of material research and development, the company has successfully developed heat-free treatment materials, high-strength and high-tough aluminum alloy materials, and new light-transmitting polymer materials; in terms of process research and development, it actively promotes ultra-large integrated die-casting of front cabins, rear floors and battery pallets; in terms of technology research and development, it continues to carry out mold supporting design technology, mold cooling optimization and control technology, etc.
In the first half of 2022, Lizhong Group and Wencan Co., Ltd. signed a "Strategic Cooperation Framework Agreement", establishing a strategic cooperative relationship in the fields of material development and process application of large-scale integrated body structural parts of new energy vehicles, integrated cast battery box boxes and other products.
