Against the backdrop of the rapid growth of new energy vehicles, the installation volume of Power Batteries is also growing quickly. Due to the certain service life of Power Batteries for new energy vehicles, the retirement market for Power Batteries has gradually become the focus of attention. Under the dual carbon background, the Lithium Battery recycling industry has also developed, and some companies in this field are striving to go public.

According to reports, recently, Guangdong Jinsheng New Energy Co., Ltd. (referred to as "Jinsheng New Energy") submitted a prospectus to the Hong Kong Stock Exchange, planning to list on the Hong Kong Main Board, with China International Capital Corporation and Zhuhai International as its joint sponsors.

It is reported that Jinsheng New Energy once hired China International Capital Corporation as its counseling organization for the preparation of the A-share listing and filed for listing counseling with the Guangdong Regulatory Bureau, intending to strive for a listing on the Shenzhen Main Board. However, in August 2024, both parties terminated the A-share listing counseling agreement and turned to listing in Hong Kong.

In recent years, against the backdrop of the A-share slowdown in IPO rhythm and strict entry barriers, many companies have terminated their A-share IPOs, including companies like Xien Technology and Jirui Technology, which, like Jinsheng New Energy, focus on the recycling and reuse of waste Lithium Batteries.

Is Lithium Battery recycling and reuse a good business? It might be worthwhile to take a look through Jinsheng New Energy.

Jinsheng New Energy is headquartered in Zhaoqing, Guangdong, and its development is backed by the story of five brothers starting a business together.

Public information shows that in 2005, the Li brothers (Li Sen, Li Xin, Li Yao, Li Yan, Li Wang) founded Gaoyao City Jinye Metal Development Co., Ltd., mainly engaged in the smelting and rolling processing of Nonferrous Metals. After several years of development, it gradually grew from a small company with only twenty or thirty people.

In 2010, the Li brothers established Zhaoqing Jinsheng Metal Industrial Co., Ltd. (the predecessor of Jinsheng New Energy), mainly engaged in the production and sales of nickel sulfate; in 2014, they established Jiangxi Ruida New Energy Technology Co., Ltd. (referred to as "Jiangxi Ruida"), focusing on Lithium Battery recycling.

From 2021 to 2023, Jinsheng New Energy and its wholly-owned subsidiary Jiangxi Ruida were recognized by the Ministry of Industry and Information Technology as "double white list" enterprises for Lithium Battery recycling and cascading utilization.

Jinsheng New Energy also entered the "2024 Global Unicorn List" released by Hurun, becoming a new energy Unicorn valued at 12 billion yuan.

The company's development cannot be separated from support from capital. Since 2021, Jinsheng New Energy has completed four rounds of financing, with investors including China International Capital Corporation, Fosun, Dacheng, Cornerstone, GAC, Bosch, and others.

The key terms of the company's four rounds of financing, the images are sourced from the prospectus.

In terms of shareholder structure, before this issuance, the Li brothers acted in concert, collectively controlling about 55.05% of the voting rights of Jinsheng New Energy. Among them, Li Sen currently serves as the chairman and general manager of the company, while Li Xin is the vice chairman and deputy general manager.

In recent years, with the explosive growth of new energy vehicle sales in China and the accelerated updates in Consumer Electronics, the supply of retired Lithium Batteries has significantly increased.

In 2023, the total amount of retired Lithium Batteries in mainland China reached 0.3661 million tons, and it is expected to reach 3.4 million tons by 2030, with a compound annual growth rate of 37.5% from 2023 to 2030.

Among the retired Lithium Batteries, the amount of retired consumer batteries and retired power batteries in 2023 was approximately 0.1062 million tons and 0.2597 million tons respectively, and it is expected to continue to increase in the future.

Image source: prospectus.

Against this background, companies like Jinseng New Energy have successfully seized the opportunity, relying on the recycling and reutilization of waste Lithium Batteries to support a large business.

The Lithium Battery recycling industry chain includes various links such as battery application, recycling channel network, secondary utilization, dismantling and recycling, and material reuse.

The main suppliers of retired lithium batteries include Lithium Battery manufacturers, Electric Vehicle manufacturers, and lithium battery recycling companies like Jinsheng New Energy that collect retired batteries and battery waste from various sources.

Jinsheng New Energy's main task is to recycle retired lithium batteries (including ternary batteries and lithium iron phosphate batteries) and battery production waste and excess materials, extracting valuable metals and 'black powder' components through mechanical crushing processes, then subjecting the black powder intermediate products to complex hydrometallurgical processes to produce solid or liquid compounds such as lithium carbonate and nickel sulfate.

The company then sells these refined products to manufacturers of ternary precursors and Cathode Material producers for the production of new lithium batteries, thereby forming a Circular Economy model.

Specifically, Jinsheng New Energy provides a series of recycled products such as lithium carbonate, nickel sulfate, cobalt sulfate, and graphite. As of the end of June 2024, sales of lithium recycling products and nickel recycling products contributed over 70% of the company's revenue.

Revenue details categorized by product type, image source: prospectus.

In recent years, the company's performance has experienced some fluctuations, and due to the significant drop in the current market price of finished products, the company has incurred net losses in 2023 and the first half of 2024.

In the years 2021, 2022, 2023, and the first half of 2024 (referred to as the "reporting period"), the company's revenue was approximately 1.133 billion yuan, 2.905 billion yuan, 2.892 billion yuan, and 995 million yuan, with corresponding net income of 0.069 billion yuan, 0.151 billion yuan, -0.473 billion yuan, and -147 million yuan respectively.

In the years 2021, 2022, and 2023, the company's gross margin was 16.7%, 14.3%, and -5.6% respectively, showing a declining trend year by year. Among them, due to the rise in raw material prices, the company's gross margin decreased in 2022; although the sales of the company's recycling products increased in 2023, the continuous and significant drop in market prices, coupled with increased inventory impairment losses, led to the company recording a gross loss.

The lithium battery material recycling and regeneration market where Jinsheng New Energy operates is a highly competitive Emerging Market; as the Industry develops and demand increases, competition is expected to continue to intensify.

These competitors may exert pressure on the company's contract prices and gross margin, and if the company cannot cope with this competition, it may lose market share to its competitors, thereby affecting operational performance.

Among Lithium Battery recycling and regeneration solution providers, Lithium Battery manufacturers and Auto Manufacturers or their affiliates have certain advantages, as they possess inherent channels to acquire retired batteries.

Third-party solution providers like Jinsheng New Energy need to establish a Lithium Battery regeneration network to procure retired batteries from upstream suppliers.

In 2023, the sales revenue of recycled materials in the global Lithium Battery recycling and regeneration solution market reached 73.6 billion yuan.

Based on the sales revenue of recycled materials, in 2023, the top five global Lithium Battery recycling and regeneration solution providers accounted for about 20.8%, with Golden Star New Energy ranking second with about 3.8% market share, second only to Contemporary Amperex Technology's Bangpu Recycling (with a market share of about 11.5%); and ranked first among third-party solution providers.

Image source: prospectus.

In 2023, the global sales volume of recycled materials in the Lithium Battery recycling and regeneration solutions market reached about 1.1697 million tons, and based on the sales volume of recycled materials, the top five global Lithium Battery recycling and regeneration solution providers accounted for approximately 24.9%, with Golden Star New Energy ranking second with a 5% market share.

Overall, the Lithium Battery recycling industry where Golden Star New Energy operates has significant growth potential, and the company has already established a certain market position after years of development. However, compared with Auto Manufacturers and Lithium Battery production companies, the company does not have an advantage in the recycling channels of used Lithium Batteries, and it faces the risk of product price fluctuations. It will not be easy to significantly increase market share in a fiercely competitive environment in the future.