As the traditional celebrations of the Lunar New Year come to an end, a titanic player in the battery manufacturing sector, Contemporary Amperex Technology Co., Limited, known colloquially as CATL, is making headlines with ambitious plans for a secondary listing on the Hong Kong Stock Exchange (HKEX). This move signifies not just a financial maneuver but a strategic leap towards greater international presence and influence in the rapidly evolving electric vehicle (EV) market.
On February 11, CATL officially submitted its application for the issuance of overseas listed foreign shares, commonly referred to as H-shares, with the intention of listing on the main board of the HKEXThe driving force behind this significant issuance is to optimize funding that aligns with the company's long-term internationalization strategy.
Market insiders speculate that CATL aims to raise approximately $5 billion through this IPO, which, if successful, could potentially be the largest IPO in Hong Kong in over three years, illustrating the renewed interest and activity in the market.
On the same day, another lithium battery company, Zhongwei Shares, also disclosed its plans to initiate preparations for listing H-sharesThis announcement aligns with the trend observed in recent months where numerous lithium battery enterprises are vying for a share of the Hong Kong market, indicating a broader industry pivot toward this financial hub.
As of February 12, CATL's A-share (the shares traded on the Shanghai Stock Exchange) closed at 255.3 yuan, reflecting a 1.39% increase and valuing the company at an impressive 1.12 trillion yuan
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This stock performance serves as a testament to investor confidence and the company's standing in the market.
Aiming for Global Expansion
More than six years after CATL’s initial debut in the ChiNext market of the Shenzhen Stock Exchange, the company is taking decisive steps to pursue a listing in Hong Kong, marking a significant milestone in its ambitious growth trajectory.
Back in March 2024, the company’s chairman, Robin Zeng, hinted at its plans for a secondary listingBy the end of the previous year, CATL had confirmed its intentions to issue H-shares and sought approval for its listing on the HKEX, following increasing demand and a reshuffling of industry dynamics.
In alignment with market anticipations, CATL’s Hong Kong IPO is a pivotal component of its broader internationalization strategyThe company has articulated that this fundraising initiative is aimed at enhancing its global footprint, establishing an international capital operation platform, and bolstering its overall competitiveness.
While the exact amount of funds to be raised has yet to be disclosed, CATL’s latest prospectus indicates that proceeds from the offering will be allocated to advancing its battery plant projects in Hungary, covering both phases one and two, along with operational expenses and general corporate uses.
In 2022, CATL embarked on constructing a major battery production facility in Hungary, aimed at achieving an annual output of 100 GWh of power battery systems
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Currently, the project has successfully progressed beyond the preliminary stages into active constructionBy December 31, 2024, CATL reported an investment of approximately 700 million euros, which is part of a larger anticipated investment of around 4.9 billion euros for both phases of the Hungary project.
CATL's global capacity expansion plans extend far beyond Hungary, with significant financial commitments being madeBy December 2024, the company announced plans for a third battery factory in Europe, expected to total an investment of 4.038 billion eurosWith over eight factories either operational or under construction abroad, CATL is clearly establishing itself as a key player on the international stage.
As of mid-2024, the balances of USD and euro accounts at CATL were approximately 6.735 billion USD and 3.858 billion euros, respectivelyThis financial footing indicates an urgent need for additional foreign exchange reserves to manage its substantial investment and forthcoming expansion demands.
It is noteworthy that CATL’s aggressive push into foreign markets has enabled it to capture a substantial share of the overall battery marketAccording to SNE Research data, CATL commanded a global market share of 36.8% in the first ten months of 2024, an increase from 35.9% in the same period of 2023, firmly establishing its position at the pinnacle of the industry.
By the second quarter of 2024, the revenue generated from international markets constituted over 30.3% of CATL’s total revenue, contributing a remarkable gross margin of 29.65%, which notably exceeded the domestic gross margin by 4.47 percentage points.
Market analysts predict that CATL's global market share will continue to expand rapidly, with the company eyeing potential opportunities in geographical markets such as Brazil, Thailand, Israel, and Australia.
Lithium Battery Companies Targeting Hong Kong
On the day CATL formally submitted its IPO prospectus, Zhongwei Shares, a manufacturer of lithium battery cathode materials, also announced its preparations for a Hong Kong IPO
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Similar to CATL, Zhongwei's secondary listing aims to establish an international capital operation platform to support its ongoing and expanding global industry layout.
Reports indicate that Zhongwei's overseas revenue has steadily increased, now accounting for approximately 45.43% of its total revenue in the first half of 2024.
The movement of lithium battery companies toward Hong Kong for listings is not entirely newIn fact, on October 30, 2024, Longpan Technology was successfully listed on the main board of the HKEX, and other companies like Jinkun New Energy have also sought listings as of late 2024.
On January 27, 2024, Xian Dao Intelligent announced it would terminate its global depositary receipt (GDR) issuance and simultaneously revealed its IPO plans in Hong Kong; on the same day, battery manufacturer Zhengli New Energy made updates to its IPO documentation for the Hong Kong market.
Against a backdrop of waning GDR financing fervor, the question arises: why are lithium battery companies focusing their sights on Hong Kong? Analysts suggest two primary reasons: firstly, to better serve their global strategic layout, and secondly, due to the advantageous nature of conducting IPOs in Hong Kong.
As the competition among lithium battery enterprises intensifies, coupled with the lucrative opportunities presented by overseas markets, the consensus within the industry has shifted towards an outward expansionListing on the Hong Kong Exchange not only allows these companies to secure financial backing but also enhances their global brand visibility and paves the way for international business growth.
High Tech Lithium notes that the capital raised through a Hong Kong IPO can be utilized more flexibly, which aligns well with companies' funding needs
In comparison, the regulatory and operational environment for Hong Kong IPOs tends to be more supportive than that for GDR issuances.
However, embarking on an IPO journey in Hong Kong carries its own set of challengesThe liquidity of the Hong Kong market has historically lagged behind that of the A-share market, which could potentially impact investor valuations and sentimentsFurthermore, the HKEX imposes stringent environmental, social, and governance (ESG) requirements, necessitating detailed ESG reporting from listed companies, with plans for even more stringent climate-related disclosure regulations set to roll out in 2025.
Updates on Lithium Operations in Jiangxi
Beyond its impending secondary listing, CATL is also facing developments regarding its lithium carbonate operations in Yichun, Jiangxi province.
Reports from February 10 confirm that CATL and Longpan Technology's joint lithium carbonate smelting facility in Yichun has gradually resumed operations, promising a revival of activities in this critical part of their supply chain.
Additionally, recent updates from UBS indicate that CATL's lithium mining project in Jiangxi is currently in the process of restoration, affirming the company’s resilience and adaptability in the face of market fluctuations.
An inquiry sent by reporters to CATL for comment on these developments was not immediately answered.
To provide context, this situation traces back to September 2024 when a research report from UBS indicated that CATL had decided to pause its lithium mica operations in Jiangxi
In response, CATL acknowledged that adjustments in the production plan for lithium carbonate were needed based on recent market conditions but refrained from revealing specific details.
Industry insiders have analyzed that CATL's Jiangxi project faces significant cost pressure due to its relatively higher marginal costs.
Following this, CATL disclosed in its third-quarter report for 2024 that it had to provision for impairment losses totaling 5.225 billion yuan in long-term assetsThis move was primarily a reflection of ongoing declines in lithium carbonate prices, with the company conducting impairment testing on mining resource-related assets that showed signs of value impairment.
During an earnings briefing in October 2024, CATL reiterated its efforts regarding the Jiangxi lithium mine situation, indicating that multiple cost-reduction strategies were being implemented successfully.
Simultaneously, fluctuations in lithium carbonate prices have been observed, with the average spot price in Shanghai for battery-grade lithium carbonate dropping from around 100,000 yuan per ton at the start of 2024 to approximately 75,000 yuan per ton by year-end.
The decline in raw materials like lithium carbonate has also adversely affected CATL's financial performance.
For the financial year 2024, CATL is expected to achieve revenue of ₹356 crore to ₹366 crore, a year-on-year decline of 8.71 per cent to 11.2 per cent, while net profit attributable to parents is expected to be ₹49 crore to ₹53 crore, a year-on-year increase of 11.06 per cent to 20.12 per cent.This will be the first time since 2015 that CATL has seen an annual revenue decline。
CATL has acknowledged that, despite an increase in battery product sales, the overall revenue decline is attributed to falling prices for lithium carbonate and other raw materials, necessitating a corresponding adjustment in product pricing.
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