The global leader in Battery has officially sounded the horn for the "second wave of growth". $Contemporary Amperex Technology (300750.SZ)$

Recently, Contemporary Amperex Technology announced plans for a secondary listing in Hong Kong, intending to issue no more than 5% of the total share capital post-issue as H shares, with Morgan Stanley estimating a financing scale of 6.8-7.7 billion dollars.

Morgan Stanley believes that, with a net cash reserve of 20.8 billion dollars, this additional funding will help the company accelerate its global capacity layout, including the expansion of its factory in Hungary, and the joint construction of a 50GWh capacity factory with Stellantis in Spain, among other projects, while also supporting the construction of battery swapping stations and the upgrade of Solid State Battery production lines.

Financing scale: estimated at 6.8-7.7 billion dollars.

In calculating the financing scale, Morgan Stanley mainly referenced the recent discount level for secondary listings in the Hong Kong stock market, expecting the issuance price of Contemporary Amperex Technology's H shares to be at a discount of 10-20% compared to A shares, thereby estimating the financing scale between 6.8-7.7 billion dollars.

Considering the approximately 20% discount rate of the second listing of H Shares compared to A Shares in 2024, and the current discount levels of about 5% and 20% for the two companies respectively, $MIDEA GROUP (00300.HK)$and$SF HOLDING (06936.HK)$and referring to the current 12% discount of H Shares compared to A Shares, $BYD COMPANY (01211.HK)$

We expect the issuance price of this H share to be at a discount of 10-20% compared to A shares, thereby estimating the financing scale between 6.8-7.7 billion dollars.

The Global expansion strategy is accelerating.

Morgan Stanley believes that Contemporary Amperex Technology is entering a new round of capital expenditure cycle, with the European market being a key focus area. Research Reports analysis states:

After a slowdown in capital expenditure in the past 1-2 years, it is believed that Contemporary Amperex Technology may welcome a capital expenditure rise cycle to support future growth opportunities. The H shares secondary listing is considered necessary to support its Global expansion plan.

In addition to the expansion plan in Hungary, Contemporary Amperex Technology recently announced a joint venture with Stellantis to build a 50GWh capacity plant in Spain, with a total investment of about 4.2 billion USD. Considering the exit plan for gasoline vehicles in the EU region, it is believed that there may be more projects in this region in the long term.

It is worth mentioning that the Research Reports also specifically mentioned the potential opportunities in the USA market:

Moreover, if elected President Trump allows Contemporary Amperex Technology to build a factory in the USA, more capital expenditures will be needed. Therefore, opening international financing channels is crucial to support the company's long-term Global expansion plan.

Existing cash reserve layout.

For the large amount of cash held by the company, Morgan Stanley believes it will mainly be used for two strategic directions:

1. Construction of battery swap station networks:

The company Holds net cash of 20.8 billion USD. It is believed that a portion of this funding will be used for the construction of domestic battery swap station networks. Although battery swap stations are considered heavy asset investments, they are necessary to leverage the company's advantage in Battery longevity, accelerate the electrification process of transportation including trucks, and maintain a dominant market share.

1. Layout of Solid State Battery technology:

In addition, the development of Solid State Battery technology is accelerating, and in the long term, significant capital investment may be needed to replace existing production lines.

High ROE business model continues to lead.

Morgan Stanley holds an optimistic view on the future development of Contemporary Amperex Technology, believing it will continue to maintain high ROE levels:

Over the past five years, the company has demonstrated strong ROE creation capabilities through product innovation and improved capital efficiency. It is expected that, in the second wave of growth, the company will continue to maintain high ROE levels.

Research Reports further pointed out two key factors that support high ROE:

We believe that in the context of the Global Energy transition, the company's continuous innovation will create new Battery demand and expand the total Battery market size (TAM). We also think that a diversified product strategy will help to enhance profit margins.

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Editor/rice