With the significant reduction of National V and National VI emission limits, after-engine measures have become the most effective way to control vehicle emissions, of which catalysts are the key.
It is reported that Zhongzi Environmental Protection Technology Co., Ltd, which focuses on the research, development, production and sales of environmental protection catalysts, will be listed soon. As one of the few major domestic manufacturers in the field of exhaust gas treatment catalysts for motor vehicles, off-road machinery and ships in China, Zhongzi Technology launched its offering on September 27, 2021 and will be listed on the Science and Technology Board in the near future. In this IPO, the company plans to raise RMB 1.46 billion, including RMB 470 million for the new catalyst intelligent manufacturing park project; RMB 265 million for the automotive aftertreatment device intelligent manufacturing industrial park project; RMB 161 million for the National VI B and above emission standard catalyst R&D capacity building project; RMB 64 million for the hydrogen energy fuel cell key material R&D capacity building project; and RMB 500 million for supplementary working capital.
Nearly 100 billion market scale
A catalyst is a substance that can change the rate of a chemical reaction without changing the chemical equilibrium and whose own mass, composition and chemical properties remain unchanged before and after participation in the chemical reaction. Catalyst technology is one of the key technologies in industrial production and daily life, which can significantly improve the efficiency of chemical reactions and is widely used in three major fields: petroleum refining, pharmaceutical chemistry and environmental protection, and one of the core efforts of innovation in the chemical industry is innovation in the field of catalysis.
Environmental catalysts are mainly composed of metal-based active components and various catalytic materials and additives to enhance catalytic performance. Due to the relatively late start of research on environmental protection catalysts in China, there is still a gap between the R&D, production and application of new advanced environmental protection catalysts in China and other developed countries such as Europe, America and Japan, and many advanced materials and high-performance catalyst production technologies have been monopolized by multinational companies for a long time. In addition, the environmental protection catalyst industry is one of the key industries to be supported and developed in China because of its high technological threshold, large market space and wide application areas.
The upgrading of National V to National VI has brought new technical challenges as well as huge market opportunities for environmental catalyst manufacturers. In recent years, the situation of air pollution control in China has become increasingly serious, with the emission of large amounts of toxic gases and solid particles seriously damaging the atmospheric environment and causing environmental pollution such as haze and ozone exceedance. In the motor vehicle emission regulations of the sixth stage, the exhaust emission limits have been significantly reduced, and compared to the fifth stage added to the number of light vehicles and other pollutants such as particulate matter emission requirements. With the launch of the national six emission standards as a symbol, China’s exhaust emission standards have long lagged behind the situation of advanced foreign standards have been reversed. At present, China’s motor vehicles are in full implementation of the National V emission standards, based on the transition to the National VI emission standards in stages. July 1, 2019, Beijing, Shanghai, Tianjin, the Pearl River Delta region, Chengdu and Chongqing regions and other parts of the region have in advance of the implementation of the National VI emission standards for light-duty vehicles.
Exhaust gas treatment catalysts play a vital role in the effectiveness of exhaust gas treatment. Although the specific composition, preparation method, physical phase and performance of exhaust gas treatment catalysts vary for different fuel types and internal combustion engine models, there are commonalities in the core technology. With the upgrading of exhaust emission standards, higher emission regulations require higher limits for various pollutants in exhaust gas and therefore higher performance requirements for catalysts. China is gradually implementing the National VI emission standard for motor vehicles, which requires significantly higher emission limits for exhaust pollutants than the National V emission standard for motor vehicles, making it significantly more difficult to develop exhaust gas treatment catalysts to meet the National VI emission standard for motor vehicles.
In the face of the new standard, CTS is in a leading position. With the continuous improvement of China’s mobile pollutant exhaust emission standards, CTS has developed a new generation of exhaust treatment catalysts to meet the National VI emission standards after more than 16 years of long-term research and development of environmental protection catalytic materials, and has obtained 11 National VI announcements for natural gas engines, 5 National VI announcements for diesel engines and 439 National VI announcements for gasoline engines.
In the context of environmental protection upgrade, the catalyst market is vast, with an industry size of nearly 100 billion. According to market research firm MarketsandMarkets, the global pollution emission control catalyst market is expected to increase from $21.1 billion in 2019 to $30.5 billion in 2024. In addition, the use of single-vehicle catalysts has risen sharply after entering the National VI emission standard stage. According to Tianfeng Securities’ calculations, the average increase in the unit price of exhaust gas treatment catalysts is expected to reach 105.72%, and the market size of China’s exhaust gas treatment catalysts will reach 93.8 billion yuan, a significant increase of 156% over the market size under the original National V emission standard.
Environmental catalyst head enterprises
The main products of Zhongzi Technology are catalysts for exhaust gas treatment of natural gas vehicles, diesel vehicles, gasoline vehicles and motorcycles, which are sold in the form of catalytic units or catalytic units and other devices encapsulated in metal shells as finished products. It is mainly composed of catalytic materials such as rare earth materials, alumina materials, precious metal materials and additives to enhance the performance of catalytic materials, installed downstream of the engine, and converts harmful gases and particles in the exhaust of internal combustion engines into harmless substances such as water through catalytic reactions such as oxidation reduction.
CTS has seized the opportunity of industry upgrade. 2018 to 2020, the company achieved operating revenue of 337 million, 1.001 billion and 2.577 billion yuan, respectively, with an average annual compound growth rate of 176.89% in operating revenue, showing a continuous rapid growth trend; while 2020, the company achieved net profit of 218 million yuan, a year-on-year surge of 152.27%. Since the implementation of the national six emission standard for heavy-duty natural gas vehicles in July 2019, the company’s performance has entered a period of rapid growth by virtue of the core technology and customer resource advantages established by the continuous R&D investment and market development in the early stage.
Zhongzi Technology’s stable customer resources guarantee the continuous improvement of performance. The company’s new generation exhaust gas treatment catalysts to meet the National VI emission standard have been supplied to mainstream engine plants such as Yuchai, Yunnai, Shangchai, Liuji Power and Xiaokang Power, and mainstream vehicle plants such as Heavy Duty Truck, FAW Jiefang and BAIC Foton.
High customer stickiness is the advantage of CTS. As the specific composition of pollutants emitted by different engines varies, the specific formulation of exhaust gas treatment catalysts also varies, and each product of downstream engine manufacturers needs to cooperate with the catalyst manufacturers represented by CTS to determine the final catalyst formulation and make environmental protection announcement. Therefore, the risk of changing catalyst suppliers and the cost of evaluation and testing is high for engine plants, and their cooperation with exhaust gas treatment catalyst manufacturers is more stable, and they generally work with selected suppliers for a long time, and as engine plants need to continuously reduce their product costs, they tend to cooperate with selected exhaust gas treatment catalyst manufacturers for continuous R&D.
In the context of foreign companies’ blockade, the performance breakthrough of domestic companies is even more important. With the rapid growth of China’s economy, the improvement of infrastructure and the continuous optimization of the industrial chain providing a good basis for the development of China’s auto manufacturing industry, China has become the world’s largest motor vehicle production and sales market for more than ten years, yet the right to speak about environmental catalysts is not in our hands. The foreign environmental catalyst giants, mainly BASF, Johnson Matthey and Umicore, with their long history and deep technology accumulation, have an overall market share of over 71% in China, occupying most of the global market share of environmental catalysts with motor vehicle exhaust treatment as one of the main application areas, and imposing strict technology blockade.
Through technology research and development, CTS has broken through the barrier of foreign investment. The catalytic material for automobile exhaust treatment has been listed as a key strategic new material urgently needed for key application areas in China. Through more than 16 years of long-term R&D, the company has broken through the technology monopoly of foreign environmental catalyst giants and mastered a full set of core technologies from formulation to process of environmental catalyst materials, such as high-performance rare earth oxygen storage material technology, high temperature resistant and high specific surface material technology, high dispersion and high stability technology of precious metals, and advanced coating technology, and has made certain breakthroughs.
Through the research and development of key technologies, Zhongzi Technology has gained recognition in the industry. In terms of technology landing, the depth of catalyst manufacturers’ research on catalytic materials and their mastery of key production processes such as catalyst coating are the direct reflection of their technology level, which determines the performance and cost of products. The company has presided over and participated in 9 major scientific research projects, including the National High Technology Research and Development Program (“863 Program”) and the National Key Research and Development Program of the 13th Five-Year Plan, related to exhaust gas treatment catalysts and hydrogen fuel cell electrocatalysts. The company has won one Second Prize of National Science and Technology Progress and three First Prizes of Provincial and Ministerial Science and Technology Progress, and has presided over or participated in the formulation and revision of 14 relevant industry standards, making it a leading enterprise in the field of environmental protection catalysts in China.
It is worth mentioning that the number of National VI natural gas engine type announcements obtained by CTS ranks first in the industry; the number of National VI diesel engine type announcements obtained ranks sixth in the industry and third among domestic manufacturers; the number of National VI gasoline vehicle type announcements obtained ranks sixth in the industry and third among domestic manufacturers. The type inspection announcement means that the catalyst manufacturer’s vehicle complies with the National VI emission standard, and the vehicle is approved for production and sales, which to a certain extent can reflect the market recognition of the catalyst manufacturer’s product technology, and the company’s technology is ahead of the market.
At present, all the products of CTS have met the corresponding standards and are leading the market. Take gasoline vehicles as an example, in the stage of National V emission standard, TWC solution is generally used, and in the stage of National VI emission standard, gasoline vehicles generally need to use TWC or TWC+cGPF combination solution. At present, the company’s gasoline vehicle exhaust gas treatment catalytic unit is mainly a three-way catalyst (TWC) and catalytic gasoline particle trap (cGPF), whose products have good exhaust gas conversion performance, small back pressure increment and good back pressure consistency of cGPF, and excellent product technology.
With the leading technology and products, the market share of CTS has been increasing. After long-term technology accumulation and product catch-up, the company’s market share in natural gas vehicle catalysts, natural gas heavy truck and diesel vehicle catalysts will rise from 11.1%, 30.55% and 5.11% in 2019 to 20.69%, 48.55% and 6.27% in 2020, respectively.
