Jiangsu Lopal Tech.'s IPO this time accounts for 15.4% of the total shares issued, raising approximately 0.575 billion based on the median offer price of HK$5.75, with one cornerstone investor locking up 20% and a free float of 0.46 billion Hong Kong dollars.
Both China Resources Beverage and Horizon Robotics have successively made profits from two major listings, boosting the enthusiasm of IPO investors.
Analyzes of new stock offerings will be released one after another in the future. Currently, there is no need to rush for financing quotas. Experienced investors engage in a battle of wits where the smart boxer often takes a step back to let the opponent make the first move. Market sentiment has a significant impact on the performance of new listings in the stock market. It's better to gauge the subscription enthusiasm before making a move.
1. IPO Information
2. Company Overview
Established in March 2003, Jiangsu Lopal Tech is a leading global manufacturer of lithium iron phosphate cathode materials and a well-known mainland Chinese manufacturer of fine chemicals for automobiles.
In 2023, based on sales volume, Jiangsu Lopal Tech. is the world's fourth-largest manufacturer of lithium iron phosphate cathode materials, with a market share of 6.5%; it is the third-largest urea manufacturer for autos in mainland China, with a market share of 9.1%; and the third-largest coolant manufacturer in mainland China, with a market share of 5.8%.
Jiangsu Lopal Tech. used to be a manufacturer of automotive chemicals, including lubricants, coolants, belonging to the "sunset industry". In 2020, it entered the "sunrise industry" new energy sector by acquiring the business of lithium iron phosphate cathode materials.
Lithium iron phosphate cathode material is currently the most widely used cathode material in lithium battery production, used in various end markets, including new energy autos and energy storage industry. The company's customers include major lithium battery manufacturers such as Contemporary Amperex Technology, rept battero, Sunwoda Electronic, eve energy co.,ltd., and directly sell lithium iron phosphate cathode material products to customers after strict validation process.
Financial data shows that in the past 2021 to 2023 and the first half of 2024, Jiangsu Lopal Tech.'s revenue was RMB 4.054 billion, 14.072 billion, 8.729 billion, and 35.69 billion respectively, with net income of RMB 0.433 billion, 1.03 billion, -1.514 billion, and -2.60 billion respectively.
Lithium iron phosphate cathode material has become the company's main business, with revenue share exceeding 70% in the past three years.
From the financial data, it can be seen that Jiangsu Lopal Tech.'s revenue fluctuated greatly, mainly affected by the price fluctuations of the raw material lithium carbonate. For example, during the peak period in 2022, the price of lithium carbonate exceeded 560,000 yuan per ton, while the current price is only 73,000 yuan/ton!
From the trend perspective, the sharp decline in lithium carbonate prices has ended, and future prices may continue to decline, but the rate of decline will gradually narrow. Driven by sales volume, Jiangsu Lopal Tech. had a second-quarter revenue of 2.1 billion, a year-on-year growth of 21%, and the gross margin gradually recovered, reaching 13.7% in the second quarter, the highest in a year and a half.
Three, comprehensive evaluation
Jiangsu Lopal Tech. (603906.SH) is a company that has relisted from A-shares to the Hong Kong Stock Exchange. When it comes to the fundamentals, we look more at the long-term investment value. For IPO subscription, we only care about whether the discount is sufficient and if there are any arbitrage opportunities.
Generally, it's best to compare the discounts of AH dual-listed companies in the same industry. Currently, there are 217 AH dual-listed companies, but none in the cathode material industry of lithium iron phosphate.
So, we can only look for references from similar industry attributes within the AH dual-listed companies. JL Mag Rare-earth (A-share market cap of 21.2 billion RMB) and Triumph New En (A-share market cap of 7 billion RMB) are both in the new energy materials related field. The H-share discount compared to A-shares is around 60%.
If the IPO price of Jiangsu Lopal Tech. is 4.5 to 7 Hong Kong dollars, with a price range fluctuation as high as 55%, it's very tricky. If the lower limit price sets the H-share market cap at 2.993 billion Hong Kong dollars, a 55% discount compared to the 6 billion RMB market cap of A-shares (approximately 6.5 billion Hong Kong dollars), if the upper limit sets the market cap at 4.656 billion Hong Kong dollars, the discount compared to A-shares is 30%.
Given Jiangsu Lopal Tech.'s market cap, industry, and the recent year and a half of losses, a 55% discount for H-shares compared to A-shares seems quite reasonable, leaving no margin for Hong Kong stock market.
Jiangsu Lopal Tech.'s IPO this time accounts for 15.4% of all shares, based on the median offering price of 5.75 Hong Kong dollars, raising approximately 0.575 billion. One cornerstone investor locks in 20%, with 0.46 billion Hong Kong dollars in circulation. The scale is too large with limited imagination space, and no institutions are willing to speculate.
Jiangsu Lopal Tech. currently oversubscribed by 1 time, with high probability it won't be oversubscribed by 15 times to trigger balloting. Groups A and B have 0.01 million lots each, based on 0.01 million applications per person, estimating a 70% chance of being successful in the draw. Even with a minimal increase at the lower limit price, if one disregards ethics for the upper limit price, they will be at a loss as profit and risk are not proportional. It's best not to participate.
This article is reposted from 'Guo Erxia' official account, edited by Wisdom Finance and Economics: Jiang Yuanhua.
