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中创新航(3931.HK):IPO点评

China Innovation Aviation (3931.HK): IPO Review

安信國際 ·  Sep 26, 2022 00:00  · Researches

Summary of the report

Company overview

Leading new energy technology enterprises: mainly engaged in the design, development, production and sales of power batteries and energy storage system products. In terms of income structure, more than 90% are power batteries, the rest are energy storage batteries and others; more than 75% are ternary batteries, and the rest are lithium iron phosphate batteries and others; from the power battery application market, nearly 95% are passenger vehicles and 4% are commercial vehicles. From the perspective of China's market share, it is 5.9% in 2021 and 8.2% in the three months ended March 31, 2022, ranking third and second among Chinese power battery companies and Chinese third-party power battery companies respectively. In terms of global market share, it was 3.2% in 2021 and 4.5% in the three months ended March 31, 2022, ranking seventh and sixth among global power battery companies, respectively. The company is also the only one of China's top 10 power battery companies with a year-on-year growth rate of more than 100% between 2019 and 2021.

The company returned to profitability in 2019: the company's revenue in 2019, 2020 and 2021 was 1,733.8 million yuan, 2825.4 million yuan and 6817.1 million yuan respectively, and the net profit from 2019 to 2020 was-118.7 million yuan, 5.1 million yuan and 140.0 million yuan respectively. In the first three months of 2022, income increased without profit, with income of 3,897 million yuan, an increase of 266 percent over the same period last year, and net profit of 63.5 million yuan, down 2.1 percent from the same period last year. The company's gross profit margin in the first three months of 2019 / 20 / 2021 / 2022 was 4.8% / 13.6% / 5.5% / 8.2% respectively, mainly due to the impact of fluctuations in the price of battery raw materials and the positive impact of economies of scale related to capacity expansion. The homing net profit margin was-6.8%, 0.18% and 2% 1.6% respectively.

Industry status and prospects

The installed capacity of power batteries in China has maintained rapid growth. The installed capacity of power batteries in China grew at a compound annual growth rate of 43.5% from 2017 to 2021, reaching 154.4GWh in 2021. The installed capacity of power batteries is expected to reach 762.0GWh in 2026, with a compound annual growth rate of 34.9 per cent from 2022 to 2026, including 31 per cent for ternary batteries and 38 per cent for lithium iron phosphate batteries.

The industry is highly concentrated. Globally, the top 10 power battery manufacturers accounted for 92.4% of the market in 2021. In China, the company ranked third with 5.9% of the market share of 9.1GWh in 2021 (52.1% of Ningde-era 80.5GWh and 16.2% of BYD 25GWh).

Advantages and opportunities

Comprehensive advantages in scientific research, product strength and large-scale production and operation capabilities: the company is one of the few power battery companies that have comprehensive independent research and development capabilities and can independently complete power battery production, introducing high-voltage ternary batteries with the characteristics of high energy density, long life and excellent safety; [magazine]

The battery is the first to pass the needle-free fire test of the ternary battery system in the industry; [One-stopBattery] the battery has a minimalist structure and has a leading advantage in energy density, safety and economy. The energy density of the company's medium-nickel high-voltage 5-series and 6-series batteries is comparable to that of Neng-8 series and has better safety performance. In addition, the company has a well-known customer portfolio, GAC Eian, Changan New Energy vehicles and Zero run as the company's customers. In the first half of 2022, the products were sold to five of the top ten new energy vehicle manufacturers in China.

Weakness and risk

A number of claims for intellectual property infringement involving some products. Ningde Times seeks a total of RMB615 million in contingent compensation and RMB 3.2 million in fees from the Group, involving six patents for certain components in four specific battery products, revenue from related products containing related components accounted for a major portion of the Group's revenue during the track record period. Once the court makes an adverse decision, in addition to compensation, it is possible to stop selling related products in the Chinese market in the future.

Faced with fluctuations in the price of raw materials, the company may record a negative gross profit. Raw materials have a great impact on the company's cost of sales, of which cathode materials account for more than 80% of the cost of sales in the past two years. If the price of raw materials continues to rise sharply, it will have a significant adverse impact on the company's business, financial situation and operating performance.

Customers are highly concentrated. Revenue from the top five accounts for more than 80% of the company's total revenue, with the largest customers accounting for 52% of total revenue in 2021 and 31% in the first three months of 2022. The company may be affected by the risk of customer concentration, which may have a significant adverse impact if there are any significant adverse changes in the customer's business, operating and financial conditions.

Any new regulations or changes in regulatory requirements relating to the end market of the product may affect business operations and prospects.

Financial performance may be affected by government subsidies.

If investment in technology and product research and development fails to meet expectations, competitiveness and profitability may be impaired.

The purpose of the proceeds from the issue

About 80% (about HK $9248 million) was used for the construction of 95GWh power battery and energy storage system production lines in Chengdu Phase I Project, Wuhan Phase II Project, Hefei Phase I Project, Guangdong Jiangmen Phase I Project and Meishan Project in Sichuan Province. It is expected that effective capacity will be expanded to 35GWh and 90GWh in 2022 and 2023.

The proceeds are about 10% (about HK $1156 million) for advanced technology research and development. The remaining 10% (about HK $1156 million) will be used for working capital and general corporate purposes.

Cornerstone investor

Tianqi Lithium, Hongsheng International Resources, Dazhong Laser Technology, Zhongwei Hong Kong, Tibet Norde, Heshi Composites, Changzhou Precision testing, Xingfa Hong Kong, XPeng Inc., TMA International, Mr. Lu Lizhi, Jiangsu Puzheng Precision, Weiwo Mobile, Jiangmen New Energy and Hefei Beicheng are cornerstone investors. In the case that the over-allotment option has not been exercised, it accounts for 41.08% of the total number of shares offered. 55.14%.

Investment suggestion

The company is a leading new energy technology company, ranking third among the top ten power battery manufacturers in China, second only to Ningde Times and BYD. At the same time, the company has comprehensive advantages in scientific research, product capacity and large-scale production and operation capacity. It has a production capacity of 11.9GWh in 2021, and is expected to expand its effective production capacity to 35GWh and 90GWh in 2022 and 2023.

The company gathers a number of upstream and downstream companies of the industrial chain as investors to introduce a luxury cornerstone lineup. However, the litigation between the company and Ningde era is faced with uncertainty, there are also customers are too concentrated, the company's profit margin is affected by raw material price fluctuations and so on.

In addition, the listing valuation of the company is as high as HK $673-90.3 billion, combined with the company's 2021 return net profit of 140 million yuan, this valuation is not cheap, higher than the industry level. Coupled with the recent market sentiment, taking into account the above factors, the company gave IPO a special rating of "5.2".

The translation is provided by third-party software.


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