Investor net Wu Wei.

Since the publication of the prospectus over two months ago, there has been no new progress in the Hong Kong listing application of Shuangdeng Group Co., Ltd. (hereinafter referred to as "Shuangdeng Shares").

As early as June 2023, Shuangdeng Shares had submitted a prospectus to the Shenzhen Stock Exchange, planning to list on the Growth Enterprise Market. However, after responding to the exchange's second round of inquiries, Shuangdeng Shares was reported by the media to have some assets originating from the delisted company Longyuan Industrial, raising suspicions of a "second listing". Faced with market doubts, Shuangdeng Shares withdrew its listing materials in April 2024.

In the process of listing on the Hong Kong stock market, Shuangdeng Shares also made some changes. For example, before applying for a Hong Kong listing, Shuangdeng Shares carried out a stock-based incentive. After the incentive, Yang Rui, the son of the actual controller Yang Shanki, current Chairman of the Board of Directors, Executive Director, and CEO, indirectly holds shares of Shuangdeng Shares.

It should be noted that with the entry of power battery companies and the large-scale production capacity of lithium batteries, sodium-ion batteries, etc., by 2023, there was an oversupply in the domestic energy storage industry. The average capacity utilization rate of the domestic energy storage industry in 2023 was only around 50%. Faced with domestic capacity saturation, in this Hong Kong listing application, Shuangdeng Shares abandoned the domestic fundraising plan and planned to raise funds to establish new lithium battery capacity in Southeast Asia.

Amid the widespread deployment of lithium batteries and sodium-ion battery production capacity in the industry, can Shuangdeng Shares, whose 60% of revenue comes from lead-acid batteries, still gain investor approval?

Existing capacity is being questioned.

Established in 2011, Shuangdeng Shares was jointly funded by natural persons Yang Shanki, Qian Shangao, Zhu Shiping, among others, with Yang Shanki as the actual controlling shareholder. After its establishment, Shuangdeng Shares mainly engaged in the research, production, and sales of lead-acid batteries. From 2012 to 2014, in response to regulatory requirements and market changes, Yang Shanki and Yang Rui integrated multiple battery assets owned by them into Shuangdeng Shares.

The targets of integration include Jiangsu Shuangdeng Group Co., Ltd. (referred to as 'Jiangsu Shuangdeng'), Jiangsu Fustai Power Co., Ltd. (referred to as 'Fustai'), Nanjing Shuangdeng Technology Development Research Institute Co., Ltd. (referred to as 'Nanyan Institute'), and other companies. During the integration process, Shuangdeng Group acquired the fixed assets such as machinery and equipment of these companies.

However, Jiangsu Shuangdeng, Fustai, and Nanyan Institute were all previously controlled by Longyuan Industry. In response to inquiries from the exchange, Shuangdeng Group also acknowledged that some of the fixed assets acquired by Jiangsu Shuangdeng may have come from Longyuan Industry. Executive resumes show that founders or executives such as Yang Shanji, Qian Shangao, and Yang Baofeng have generally worked for Longyuan Industry or its subsidiaries.

Faced with market doubts that part of Shuangdeng Group's assets came from a delisted company, triggering concerns of 'secondary listing,' the company ultimately withdrew its listing application from the Growth Enterprise Market in April 2024.

Starting out with lead-acid batteries, as of the deadline, Shuangdeng Group's main production capacity has not undergone significant changes. According to Shuangdeng Group's disclosure, as of the first quarter of 2024, lead-acid batteries provided the company with 0.479 billion yuan in revenue, accounting for as high as 59.3% of the company's total revenue for that period.

With technological advancements, the comparables listed by Shuangdeng Group in its GEM application, such as Zhejiang Narada Power Source (300068.SZ) and Shandong Sacred Sun Power Sources (002580.SZ), primarily focus on lithium-ion batteries. Therefore, the exchange in its inquiries raised concerns regarding 'differences and rationality of revenue structure and technological route compared to comparable companies in the same industry, as well as the risks of technological obsolescence.'

Shuangdeng Group elaborates from the perspective of business layout, customer demand, technical parameters, etc., that the company's products do not face risks of being outdated or phased out. It should be pointed out that Guangzhou Great Power Energy and Technology (300438.SZ), Jiangsu Transimage Technology (002866.SZ), and other companies have already begun to focus on the sodium-ion energy storage track.

Industry competition is intensifying.

In the Hong Kong listing materials, Shuangdeng Group claims to be the global leader in energy storage for big data and communication field. Admittedly, as of the end of 2023, 78.9% of Shuangdeng Group's revenue comes from communication base stations or datacenters. However, the barriers between electrical energy storage scenarios and big data and communication energy storage in the industry are not very clear, and electrical energy storage products can also be applied to the field of energy storage for big data and communication after parameter adjustments.

As the industry leader Contemporary Amperex Technology (300750.SZ), its products have expanded to emerging application scenarios such as backup power for communication base stations, UPS backup power, island microgrids, and intelligent charging stations for light storage and inspection. According to SNE Research statistics, Contemporary Amperex Technology has ranked first in global energy storage battery shipments for three consecutive years from 2021 to 2023; and in the first half of 2024, the company's energy storage battery shipments also outperformed other enterprises. As of the first half of 2024, the revenue of Contemporary Amperex Technology's energy storage business has reached 28.8 billion yuan.

It is worth noting that although the global annual demand for new energy storage is huge, with the continuous commissioning of a large amount of new production capacity, the industry has experienced overcapacity. The "Energy Storage Industry Research White Paper 2024" shows that in 2023, China's energy storage battery shipments were about 200 GWh, while the global annual total installed capacity of electric power storage at the same period was about 100-120 GWh, clearly indicating oversupply, with the industry's average capacity utilization rate only around 50%.

According to the Gao Gong Industry Research Institute's forecast, in 2024, the overall Chinese new energy storage market will still be in surplus, with system integration being more brutal than the battery core link competition. More than 50% of energy storage system enterprises (including large-scale storage systems, industrial and commercial storage systems, household storage system enterprises, etc.) will be eliminated and eliminated, with the top ten energy storage system integrators to divide more than 80% of the market share.

The intensification of industry competition is also reflected in the business data of Shuangdeng Shares. In 2022, Shuangdeng Shares' revenue increased by 66.81% compared to 2021, while in 2023, its revenue only increased by 4.63% year-on-year; in the first quarter of 2024, Shuangdeng Shares' revenue has experienced a further decline of 10.33% compared to the same period in 2023.

In order to cope with the fierce industry competition, Shuangdeng Shares have changed their fundraising plans compared to the previous one. In the previous IPO, Shuangdeng Shares planned to raise funds to build a 2.5GWh annual production capacity of energy storage lithium-ion batteries in Zaoyang, Hubei; this time, the fundraising project has been changed to establish a lithium-ion battery production facility in Southeast Asia, with an annual production capacity of about 3.0GWh, while also strengthening overseas sales and marketing. However, with the release of overseas energy storage demand, industry giants such as Contemporary Amperex Technology, Narada Power Source, and Sunwoda Electronic (300207.SZ) have successively ventured into overseas markets to seize market share.

Facing doubts about production capacity and technology in the intense industry reshuffle, can Shuangdeng Shares gain market recognition by listing on the Hong Kong Exchange? (Produced by Financial Thinking)■