【Zhenzhuo IPO Trends】Introduction to Longpan Technology (02465.HK) new stock. Investment rating: Neutral.
Longpan Technology is one of the world's leading manufacturers of lithium iron phosphate (LFP) cathode materials and a well-known producer of fine automotive chemicals in mainland China. The company operates in two main segments: (1) Production and sales of LFP cathode materials, which are the most widely used cathode materials for lithium-ion batteries, including applications in new energy vehicles and energy storage; (2) Fine automotive chemicals, involving the production and sales of a diversified range of automotive chemicals, including diesel engine exhaust fluid, automotive and industrial lubricants, coolants, and vehicle care products.
Longpan Technology is listed on the Shanghai Stock Exchange, with its A-share price at 10.87 RMB, equivalent to 11.87 HKD, resulting in a 48.4% A-H share price discount (based on the mid-point of the offering price).
Although $LOPAL TECH(02465.HK) operates in the two major segments mentioned above, since 2022, the LFP business has accounted for 70% to 90% of the company's total revenue. According to the prospectus, in terms of 2023 sales volume, the company is the fourth-largest LFP cathode material manufacturer in China and globally, with a 6.5% global market share.
Longpan Technology's largest customer is CATL (00750.SZ), which accounted for 28.6%, 53.2%, and 30.3% of total revenue over the past three years, respectively. The high revenue contribution from CATL is primarily due to its substantial demand for LFP cathode materials, as it is one of the world's leading lithium-ion battery manufacturers, and the lithium battery industry is highly concentrated.
Like other lithium material manufacturers, such as Hong Kong-listed $GANFENGLITHIUM(01772.HK) and $TIANQI LITHIUM(09696.HK), Longpan Technology also faces profitability pressure due to the sharp decline in lithium prices. In 2023, the company reported a net loss of 1,514.2 million RMB (same below), compared to a net profit of 1,029.9 million RMB in 2022. This was mainly due to an unprecedented drop in lithium carbonate prices in 2023, leading to a temporary mismatch between the cost of LFP cathode materials and their revenue contribution. This situation persisted in the first half of 2024, with the company's LFP cathode material sales volume reaching 74,503 tons, a year-on-year increase of 99.1%. However, the average selling price of the material was 33,228 RMB per ton, a year-on-year decline of 56.4%. As a result, revenue from LFP cathode material sales still fell by 13.2% year-on-year in the first half of this year.
Given that lithium prices have yet to recover and the intense competition in the domestic new energy vehicle market has made profitability more challenging, upstream companies are finding it difficult to raise prices to improve margins. The stock prices of the two lithium-related companies listed in Hong Kong also remain subdued, and we maintain a "Neutral" rating.
IPO Details
Industry: New Energy
Listing Category: Main Board
Major Shareholder: Shi Junfeng (35.93%)
Number of Shares Offered (million): 100.0
Offer Price (HKD): 4.5 - 7.0
Proceeds from Offering (billion HKD): 5.2
Placing Shares (million): 90.0
Public Offering Shares (million): 10.0
FY23 Net Loss (million RMB): 1,233.3
FY23 P/E Ratio: NA
Total Market Cap (billion HKD): 62.79-65.29
Total Shares Issued (New + Existing) (billion): 6.63
Adjusted Net Asset per Share (HKD): 5.14-5.51
Board Lot (shares): 500
Sponsors: Guotai Junan, Kaisheng
Schedule
Registration Start Date: October 22, 2024
Registration Deadline: October 25, 2024
Announcement of Application Results: October 29, 2024
Refund of Cheques: October 30, 2024
Trading Start Date: October 30, 2024
Analyst: Gong Junhua, CFA
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