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Notes on CATL 2023

`1/ shareholder return is real

annual dividend of 22bn rmb, out of net income of ~44bn net income -> ~50% payout ratio.

this is also due to scaling back of capex (down 30% yoy in FY23)

 

2/ growth has slowed to almost zero

q4 gross profit is up only +2% yoy

q4 net income is -1% yoy

however, with utilization up, 2024H2 and beyond should return to growth

 

3/ barrier in internationalization

both EU and US want to localize the whole value chain, which seems to be a big investment, and involves upstream & downstream companies.

CATL doesn’t see good return and hasn’t done massive capital-heavy investments.

Licensing model is what clients are happy about, which is capital-light for CATL, but growth in net income would be less.

 

Is it possible that US inflation data is “tweaked”?

US reported Feb CPI (inflation) data: +0.4% mom and +3.2% yoy

Core CPI: +0.4% mom and +3.8% yoy

Slightly ahead, which makes it more difficult for Fed to cut rates.

However, is the data a bit inflated? I say possible.

Here is another inflation gauge by Truflation: only +1.64% yoy in March; below 2% in Feb

It’s true that US economy is stronger than most other places around the world.

However, it’s hard not to think that maybe there are some political reasons to “influence” CPI, which can influence Fed decision. After all, Fed is “data dependent”. See this post (Fed is bullied by the market – why?) as well.

Some elements from official CPI data can be more easily to “influence” e.g. used cars.

I will just stop there.

Tesla Shanghai export – not looking great

Global EV demand is weak; Tesla Shanghai’s export also seems to be under pressure.

Tesla Shanghai Jan+Feb export number is down 22.5% yoy.

Overall (export+domestic) Tesla Shanghai Jan+Feb is down 6% yoy.

Looks to be a flattish or small growth year for Tesla SH in 2024.

Btw, looks like Elon Musk is really focusing on Grok, SpaceX, and Twitter.

Why property price to income ratio this high?

China doesn’t have a nationwide recurrent property tax that applies to all residential.

  • in some cities with property tax experiment, usually certain area is exempted from taxation, e.g. Chongqing is 180 sqm

Hukou policy means residential property comes with other value. Not owning one will cause inconveniences: e.g. renting is not similar to ownership in education etc.

Renter’s right vs landlord is not like what usually seen in mature markets.

Most people don’t pay tax on rental income.

One-child policy plus decades of economic growth created massive buying power for this one-child generation. When you have 4 parents supporting the new couple to buy 1 home, that purchasing power is hugely inflated.

Local gov’s budget is partially financed by selling lands (use rights) for residential property development. High price -> higher budget.

 

Future of tech – how AI and blockchain might intersect

AI will be so good at mimicking human.

Blockchain will be the tool to verify origin.

What news, photos, videos should I trust?

I am more likely to believe in those send from my friends whom I trust.

Fake account won’t work if I am already connected with the real account.

The reason I can recognize the “real” account from the “fake” one, even if they look exactly the same, is due to the history (conversations etc.) that happened before, which is what blockchain is about.

McDonald’s China menu price / China CPI

There was this “oh麦” membership offered by McDonald’s China.

If you buy the membership, you can purchase several “4件套” for a bigger discount.

It was rmb 29 for [Big Mac combo meal + 5 Chicken Nuggets] back in 2021.

The price increased by 1 rmb generally in July 2022, when the membership was upgraded to “O麦金” membership. [https://www.zhihu.com/question/543192349]

[Big Mac combo meal + 4 Chicken Nuggets] -> 30 rmb, or 3.4% increase

The cheaper grilled chicken combo + 4 chicken nuggets also increased by 1 rmb to 26 rmb, or 4%; considering the number chicken nuggets decreased by 1, price hike here is more than 4%.

In Dec 2023, “4件套” price hiked by another 1 rmb.

[Big Mac combo meal + 4 Chicken Nuggets] -> 31, or 3.3% increase

The cheaper grilled chicken combo + 4 chicken nuggets also increased by 1 rmb to 27 rmb.

Another interesting thing is the price before discount.

Here is the table to summarize the modest price increase in China.

 

Nio real net cash position (21q4 – 23q4)

Interest charting…

if we exclude restricted cash, and cash borrowed from WC, and recent equity injection, here is Nio’s quarterly end net cash position.

What’s the problem?

  • declining/pressure gross profit level (GP per car x volume) due to fierce competition & macro backdrop doesn’t support strong demand
  • increasing opex & capex (autonomous driving, chips, international expansion, new sub-brand, battery swap stations etc.) with a limited gross profit level.