1, Business Overview
Changes in business model during the reporting period
The company specializes in the research and development, production, and sales of special graphite materials and products. It is one of the largest production enterprises in the domestic special graphite industry and has a high reputation and influence in the industry. The company has integrated production and processing capabilities from grinding, kneading, roasting, impregnation and graphitization treatment to deep processing.
(1) Sales model
The company mainly obtains orders through telephone communication, Internet and customer visits by sales personnel. The company and its customers mainly adopt a "cooperation agreement framework+order" model for transactions, and the sales price is generally based on the market.
According to the different types of company customers, the company's sales model can be divided into direct sales and indirect sales. The direct sales customers are graphite product processors and industry end customers, while the indirect sales customers are traders. The company mainly focuses on direct sales, with indirect sales as a supplement. The specific situation is as follows:
For special graphite and graphite billet products, due to the long production cycle of the company's products and the fact that the sales customers are mainly graphite product processors, the delivery time required is usually short. Therefore, the company's production and sales model is not "order based" production and sales, but based on historical sales, inventory of products and finished products, market conditions, and expected future demand. Customers usually inquire about goods from the company based on their downstream order situation and production and sales needs. Based on the product inventory data provided by the company's sales personnel and the recently completed product data, they place orders with the company and sign corresponding order contracts. Orders generally have the characteristics of small amounts and multiple frequencies.
For special graphite products, their sales customers are mainly industry end customers. The company's production and sales model is "order based" production and sales. The company generally determines the contract delivery time with customers based on its own precision processing production capacity and scheduling situation. Due to the fact that these end customers are mostly large and medium-sized enterprises or listed companies in various industries, after reaching preliminary cooperation intentions with customers, the company generally needs to cooperate with customers to complete sample testing and supplier certification before signing a formal contract with them to supply goods.
In addition, the company also has a small number of trading customers who have no production and processing capabilities. After purchasing products from the company, they directly sell to downstream customers. The sales pricing of the company to trading customers is consistent with that of other customers, and they are all sold out. After the company sells products to them, customers sell them on their own according to local market conditions and bear their own profits and losses.
After the company signs an order with the customer and completes production, the sales department signs a delivery plan and arranges shipment and transportation according to the agreement between both parties. The company will transport the goods to the customer's designated delivery location or the customer will pick them up at their doorstep. Among them, after completing the export customs declaration, export sales need to obtain the customs declaration form and the bill of lading issued by the freight forwarder, while domestic sales need to obtain the customer's signed receipt. The finance department is responsible for issuing invoices, settling payments, and other related matters during the sales process.
(2) Procurement mode
The main raw materials and auxiliary materials purchased by the company are calcined petroleum coke, asphalt coke, medium temperature asphalt, high-temperature asphalt, and graphite semi-finished products. There are many suppliers of these raw materials, and the market prices are relatively open and transparent. To ensure the quality of raw materials and the continuous stability of supply, the company has established a supplier management system, strictly screening raw material suppliers, maintaining long-term and stable cooperative relationships with important raw material suppliers, and ensuring sufficient and stable supply of raw materials. The company searches for potential suppliers through industry associations, exhibitions, supplier websites, etc., and selects the final supplier by understanding the supplier's product quality standards and conducting on-site sample inspections. For calcined petroleum coke, asphalt coke, medium temperature asphalt, and high-temperature asphalt, the company mainly adopts a "production to order" procurement model. At the same time, the company will predict the expansion of the future sales market, and make moderate and appropriate advance stocking based on the recent fluctuations and expected future trends of some raw material prices. For graphite semi-finished products, the company mainly adopts a procurement model of "on-demand production and purchase based on production". Due to the large number of specifications and long production cycles of special graphite, the company's production and sales plans cannot fully cover them. In order to ensure customer stickiness, the company will purchase specific specifications of graphite semi-finished products from the market for production and use.
After the company's procurement plan is approved, the procurement department will prioritize selecting suppliers with good cooperation for inquiry. If there are no suppliers in the past who can provide the required raw materials, the procurement department will conduct a public inquiry and select suitable suppliers from the quoted suppliers according to the company's audit system. The procurement department signs a purchase contract or issues a purchase order with the confirmed supplier based on the audit. After the goods arrive, the quality inspection department inspects the purchased raw materials. The qualified raw materials are approved for storage, and the finance department performs accounting processing based on relevant documents and vouchers.
(3) Production mode
(1) The company's self-produced production model
For special graphite materials, the number of impregnations varies from one to three times and the number of calcinations varies from one to four times depending on the product specifications and process requirements. Therefore, the production cycle of the product varies from 3 to 10 months. Among them, the standard three roasting products produced by the company generally take 7-8 months, while the delivery deadline required by industry orders is generally 3 months. Therefore, the company's production planning department mainly formulates production plans based on sales orders, historical sales, downstream demand forecasts, and inventory conditions, and communicates the production plans to the production workshop to coordinate and arrange production. Some orders cannot be fully covered by the company's production and sales plans. In order to ensure customer stickiness, the company will purchase graphite semi-finished products from the market for production and use. When the sales department receives such orders, the production planning department will make a production plan based on the company's production line load situation. The production workshop will analyze the demand for graphite semi-finished products according to the production plan and make a purchase requisition to send to the procurement department. After the purchased graphite semi-finished products are stored, production will be coordinated and arranged. The quality inspection department inspects and supervises raw materials and finished products. The finance department is responsible for cost accounting, guiding production workshop statistical work, supervising product inventory, and conducting monthly cost accounting analysis.
For graphite products, the company's products belong to customized products and are produced according to orders. After receiving customer orders, the company formulates specific production plans in the production workshop based on delivery time, product specifications, and product quantity, and organizes the production of each product according to the production plan. The quality inspection department inspects and supervises raw materials and finished products. The finance department is responsible for cost accounting, guiding production workshop statistical work, supervising product inventory, and conducting monthly cost accounting analysis.
(2) The production mode of outsourcing processing by the company
Due to limitations in the company's own production capacity and sales demand, the company regards outsourcing processing as an important means to supplement production capacity. For outsourced company products, the production planning department of the company selects suitable factories from the outsourcing manufacturers that the company has been cooperating with for years. If the existing outsourcing manufacturers are busy with production and unable to provide outsourcing, the Production Planning Department will choose a production enterprise with good market evaluation and organize the dispatch of technical personnel to inspect and evaluate the production conditions of the enterprise, determine the manufacturer, and sign an agreement. The production planning department of the company dispatches resident administrators to guide and monitor the outsourced processing site based on customer order requirements, in order to ensure product quality. Outsourced products must be submitted to the quality inspection department for inspection and acceptance before being put into storage. For products that fail the sampling inspection, the quality inspection department will order them to rework. The company will continuously track its ability to fulfill obligations based on comprehensive information such as evaluations from on-site administrators and the quality inspection department, as well as changes in the operating status of outsourced processors. Through the aforementioned quality control measures, the company is able to effectively control the product quality of outsourced processors, thereby ensuring the good quality of the company's products.
The company has determined the existing production mode based on factors such as product technology characteristics, production process flow, and market demand, and the production mode was stable during the reporting period.
(4) Profit model
The main sources of revenue and profit for the company are sales revenue from various graphite materials and graphite products, as well as entrusted processing and production. During the reporting period, the company's business model did not change compared to the previous year.
2, Business Review
(1) Business plan
During the reporting period, the lithium battery industry, as the main downstream usage area, was in a period of industry adjustment and its rapid expansion slowed down. However, the demand for graphite materials used as consumables remained relatively stable. With the continuous production of new production capacity, the company's revenue scale has also increased, and the company has basically achieved its established business goals.
During the reporting period, the company achieved a revenue of 724658383.78 yuan, an increase of 30.27% compared to the same period last year; The net profit was 71505777.27 yuan, a decrease of 26.57% compared to the same period last year; The net profit attributable to the parent company was 58504104.52 yuan, a decrease of 36.18% compared to the same period last year. As of December 31, 2023, the total assets of the company were 1915937556.88 yuan, and the net assets were 975452452.94 yuan, representing a year-on-year increase of 21.60% and 62.05%, respectively. The main reason for the decrease in profits in 2023 is the loss of negative electrode material graphitization outsourcing business. In 2022, the company received advance payments from Jiangxi Zichen Technology Co., Ltd. and Liyang Zichen New Material Technology Co., Ltd. (both wholly-owned subsidiaries of Putai Lai (603659)) when investing in the construction of graphitization furnaces, agreeing to do negative electrode material graphitization outsourcing business for Zichen Company. In 2023, the new graphite furnace began trial production, but the outsourcing price was at a historical low level (the negative electrode material graphitization outsourcing price was over 25000 yuan/ton in 2022, and dropped to 1-12000 yuan/ton in 2023), resulting in significant losses in the company's outsourcing business. The company has reached an agreement with the client to terminate this business in November 2023.
During the reporting period, the focus of the company's work revolved around long-term development strategies and annual business plans, based on the company's core competitiveness, and rapidly developed and strengthened.
1. Rapid expansion of production capacity
The company has an integrated production capacity for special graphite from grinding, kneading, roasting, impregnation, and graphitization treatment. On the basis of the original project capacity, the production capacity is further expanded and some of the original production capacity is technically improved. In addition, the wholly-owned subsidiary Jiangxi Ningyuhong New Materials Co., Ltd. has also put into operation some of the production lines that have been built for the annual production of 20000 tons of medium and coarse structured graphite project. When the above projects are completed and put into production, the overall production capacity of the company will be greatly improved.
2. Extend the industrial chain and enrich product structure
At the same time as expanding its main business, the company has connected the upstream and downstream industrial chain of special graphite through its controlling subsidiary Jiangxi Ningheda New Materials Co., Ltd., assisting the development of the enterprise, and has completed the transformation from a graphite raw material supplier to a graphite product supply service provider; Established a wholly-owned subsidiary, Jiangxi Ningyuhong New Materials Co., Ltd., and gradually constructed and put into operation, committed to providing supporting services for the lithium battery industry and strengthening the development of the new materials and energy industry chain.
3. Upgrade and renovation of production processes
The successive production of new energy-saving and environmentally friendly roasting furnaces and energy-saving new graphitization furnaces has increased self-produced production capacity, reduced the proportion and cost of outsourced processing in related processes, and improved production efficiency and product supply capacity; The newly built isostatic pressure product production line has been debugged and put into operation, and the product structure has been upgraded.
4. Vigorously carry out technological research and development
The company actively maintains close industry university research cooperation with research institutions. Based on the field of special graphite, we will carry out technological innovation, further improve product quality, and strive to achieve advanced quality levels both domestically and internationally. The company has established a new material research and development center with the Graphene Engineering and Industry Research Institute of Xiamen University, a graphite/graphene new material research and development experimental base with Shaanxi University of Science and Technology, and a high-end talent cooperation mechanism with Luoyang Institute of Technology.
5. Standardize management and strengthen internal control
During the reporting period, the company utilized the listing platform of the Beijing Stock Exchange to continuously improve its organizational structure and strengthen internal control management. The production system adopts lean production management methods, optimizes management processes, and establishes a complete supply chain system for production and finance, enabling efficient internal operation of the organization and laying a more solid foundation for the rapid development of the company.
(2) Industry situation
Special graphite, due to its superior performance, has been increasingly widely used in high-tech fields such as lithium batteries, photovoltaics, semiconductors, aerospace, nuclear power, etc. It is one of the important resources that cannot be replaced by strategic emerging industries. The special graphite industry in China started relatively late and has developed rapidly in the past decade, but there is still a certain gap with the world's leading level. However, in recent years, with the rise of the downstream industry of special graphite, high-end special graphite products have been constantly emerging. Domestic special graphite production enterprises have continuously improved their production technology and research and development level, and the gap with foreign advanced levels has been narrowing. Among domestic companies in the same industry, some products in the fields of photovoltaics, semiconductors, electric sparks, etc. have already replaced imported products from overseas. On October 20, 2023, the Ministry of Commerce and the General Administration of Customs issued a notice on optimizing and adjusting temporary export control measures for graphite items, further clarifying that "artificial graphite materials and their products with high purity (purity>99.9%), high strength (flexural strength>30Mpa), and high density (density>1.73g/cubic centimeter) shall not be exported without permission, emphasizing the important significance of special graphite in national strategy.". With the accelerated development of industries such as semiconductors, lithium batteries, photovoltaic solar energy, artificial diamonds, electrical discharge and mold processing, and nuclear power in China, it is expected that the market demand for special graphite will show rapid growth in the future.
3, Future outlook
(1) Industry development trends
The special graphite industry, as an important component of the new materials field, has shown significant development trends in recent years. Its downstream industries include lithium batteries, photovoltaics, semiconductors, metallurgy, artificial diamonds, electronics, aerospace, military industry, nuclear engineering, etc. The characteristics of special graphite determine that it is a consumable material. The potential for domestic special graphite material production enterprises to attract medium - and long-term strategic development opportunities.
(1) The rise of downstream industries expands the market space for special graphite
Special graphite is widely used in industries such as metallurgy, chemical industry, machinery, electronics, photovoltaics, lithium batteries, artificial diamonds, new energy, aerospace, military industry, nuclear engineering, etc. It is one of the important resources that cannot be replaced by strategic emerging industries.
In the field of photovoltaics, special graphite is mainly used in graphite thermal fields for monocrystalline silicon growth furnaces and graphite components for polycrystalline silicon ingot furnaces; The rapid development of photovoltaic solar energy will directly drive the sustained growth of demand for special graphite; In the field of lithium batteries, negative electrode materials mainly serve as the main body for lithium storage, achieving the insertion and removal of lithium ions during the charging and discharging process, while special graphite is mainly used as a crucible for carbonization and sintering of negative electrode materials; In the field of artificial diamond, special graphite is mainly used as a sintering mold for artificial diamond products, which is used to limit the shape and size of diamond products. It is an essential consumable for manufacturing diamond cutting heads, grinding blades, saw blades, and other products; In the field of electrical discharge machining, copper or graphite materials can be used as anode tool electrodes. Compared with copper electrodes, graphite electrodes have the characteristics of low density, easy processing, less stress and thermal deformation during cutting, and small coefficient of thermal expansion when the melting point is above 3000 ℃; In the field of nuclear power, special graphite based high-temperature gas cooled reactors are essential graphite materials. High temperature gas cooled reactors are recognized by the international nuclear energy community as the currently safest new type of nuclear reactor, and are the development trend of future nuclear power installations; In the casting industry, special graphite is also an irreplaceable material for making crystallizers. It is used in the large-scale continuous casting production of pure copper, bronze, and brass and is a key component in crystallizers; In addition, special graphite is also used to make sintering molds for diamond tools and hard alloys, thermal field components (heaters, insulation tubes, etc.) for fiber drawing machines, thermal field components (heaters, bearing frames, etc.) for vacuum heat treatment furnaces, as well as precision graphite heat exchangers, mechanical sealing components, piston rings, bearings, rocket nozzles, etc.
With the accelerated development of industries such as semiconductors, lithium batteries, photovoltaic solar energy, artificial diamonds, electrical discharge and mold processing, and nuclear power in China, it is expected that the market demand for special graphite will show rapid growth in the future.
(2) Domestic substitution of high-end special graphite has entered an accelerated period
The development of high-end special graphite, represented by isostatic pressing graphite, began in the early 1960s. Initially, it was mainly trial produced by research institutes. However, due to weak technical foundations and technological blockades by foreign enterprises, the overall level was far behind that of countries such as the United States, Germany, France, and Japan. Due to the fact that isostatic pressing graphite is an important material in multiple important fields such as photovoltaics, semiconductors, nuclear energy, and military industry, achieving localization has profound significance. Since the 1990s, domestic graphite manufacturers have successively entered related fields, and the domestic substitution of isostatic pressing graphite has gradually accelerated. After years of development, the domestic isostatic pressing graphite market has formed a multipolar competition pattern between domestic manufacturers and overseas graphite giants. It has successfully broken the monopoly of foreign isostatic pressing graphite enterprises in China, and the domestic substitution of high-end special graphite is accelerating.
(3) Customized design and production are the future development trends
At present, domestic special graphite materials are mainly relatively standardized products, with the main difference being their different specifications and sizes. Special graphite materials are formed through physical processing methods such as cutting and polishing by downstream graphite product manufacturers to form products that can be applied in different fields. The imported products from overseas have complete brand names and diverse classifications, and have been personalized for various downstream sub industries. With the continuous expansion of downstream application fields of special graphite materials, customized design and production for different industries and application fields is also the trend of future development.
(2) Company development strategy
The company focuses on complementary strengthening of the industrial chain around the upstream and downstream of special graphite, and has begun to enter the new energy field, gradually building the company into a graphite product base that integrates various businesses such as graphite materials, graphite deep processing products, new energy materials, and graphene industrialization - the "China Ink Capital". Firstly, adhere to the main business of molding special graphite and consolidate market share;
Secondly, explore high-end isostatic pressing graphite business, especially in the semiconductor field, and enhance product positioning;
Thirdly, synchronize the production of medium and coarse structured graphite to enrich product structure;
Fourthly, continue to extend the industrial chain, enhance the proportion of terminal graphite products, and increase foreign exports.
(3) Business plan or objectives
The company will actively operate through internal management, production capacity layout, market development, and other aspects in accordance with its overall development strategy, combined with its own development needs, to comprehensively promote the steady and healthy development of the company.
1. Fully utilize our own production capacity advantages and adjust product structure according to the market.
The company has 4 own grinding and kneading production lines, 5 roasting production lines, and 4 graphitization production lines. Its own production capacity is among the top in the domestic industry, and its product series includes fine structure molded products, fine structure isostatic pressing products, and a full range of special graphite products with medium and coarse structures. Free production capacity equipment can achieve universality through technological transformation or process adjustment. The company will layout its product structure according to downstream market changes, consolidate its market share in special graphite molding, increase the production of high-end isostatic pressing graphite, and adjust the production capacity of medium and coarse structure graphite according to demand.
2. Expand the downstream high-end market and enhance the core competitiveness of the industry.
In recent years, the downstream use of the company's products has mainly focused on the field of lithium battery materials, mainly consumables used in high-temperature carbonization of negative electrode materials, with relatively low technical requirements. To achieve significant development, the company must explore markets with higher technological content and produce products with higher added value.
3. Increase enterprise research and development efforts to maintain a leading position in the industry.
After more than ten years of industry cultivation and continuous research and development innovation, the company has mastered the core technology and process of its main business field, and has strong research and development innovation capabilities. The company's research center is responsible for research on technology development, innovation, introduction, absorption, and application in the special graphite industry. Based on the constantly changing industry characteristics and market environment, it timely adjusts and optimizes the content of technology development. In addition to continuously strengthening its own research and development capabilities, it also focuses on cooperation and exchange with professional research institutes, universities, cooperative enterprises, industry alliances, and association associations, forming an open and forward-looking research and development technology system.
4. Strengthen cost management to achieve cost reduction and efficiency increase for enterprises.
Faced with increasingly fierce market competition, enterprises must tap into their own profits, strengthen internal cost management, achieve cost reduction and efficiency increase, and enhance their competitiveness. Through lean production, optimize various processes and reduce production costs; Strengthen and refine performance evaluation to reduce management costs; Implement effective financial planning, reduce financial costs, etc.
5. Build an ESG management system and actively give back to society and shareholders.
Gradually build an ESG management system, integrate ESG concepts into the entire process of production, management, and operation, achieve long-term sustainable development in terms of environment, society, and corporate governance, improve the company's profitability and dividend ability, and actively give back to all investors.
(4) Uncertainty factors
The production cycle of special graphite is relatively long, making it difficult to make timely adjustments to the price changes in downstream industry markets. The fluctuations in downstream industries will directly affect the profitability of the special graphite industry.
4, Risk factors
(1) Risk factors that continue until this year
1. The risk of macroeconomic fluctuations
Description of Major Risk Matters: The downstream industries of the company's main products, special graphite, are mainly lithium batteries, photovoltaics, artificial diamonds, machinery, electronics, chemicals, metallurgy, rail transit, national defense and military, aerospace, nuclear industry, etc. The carbon industry in which the company operates is closely related to the development of downstream industries, and downstream industries have a significant traction effect on the development of this industry. The industrial policies and market prosperity of downstream industries directly affect the market demand of the special graphite industry. Downstream industries are closely related to the macroeconomy, and changes in economic cycles and national industrial policies have a significant impact on the sales of company products.
Response measures: The company actively responds to market fluctuations by refining enterprise management, optimizing process flow, improving product qualification rate, developing markets, expanding customers, increasing research and development investment, enhancing product technology content and market competitiveness, and other measures.