Author | Zhou Zhiyu

After much preparation, Contemporary Amperex Technology has taken an important step in financing in the overseas market.

On the evening of December 26, Contemporary Amperex Technology announced plans to issue overseas listed foreign shares and apply for listing on the Main Board of the Hong Kong Stock Exchange.

This listing on the Hong Kong Stock Exchange for Contemporary Amperex Technology is still subject to approval from regulatory agencies, including the China Securities Regulatory Commission. If successful, Contemporary Amperex Technology will officially enter the Hong Kong stock market next year, making it the largest IPO in Hong Kong in the past three years since Kuaishou's listing in 2021.

According to previous market estimates, the financing amount for Contemporary Amperex Technology will be around 5 billion USD, which, when converted to the current stock price, accounts for about 3.2% of its currently issued shares, resulting in minimal dilution impact on existing shareholder equity.

For Contemporary Amperex Technology, this will provide a more convenient overseas financing channel, which is extremely important for its efforts in expanding the overseas market.

From the various equity financings after the listing of Contemporary Amperex Technology, it can be seen that each large-scale financing is aimed at promoting further development of its business.

In the past six years, Contemporary Amperex Technology went public on the Shenzhen Stock Exchange and conducted two large-scale equity financings, primarily to promote the construction of related specific production bases and research and development projects, as well as to supplement working capital. These three financings totaled 69.82 billion yuan, allowing Contemporary Amperex Technology to receive financial support during its rapid development phase, with its stock price increasing more than 26 times.

This financing in the Hong Kong stock market has a similar background. The high capital expenditure period for Contemporary Amperex Technology domestically has passed, but it is still in a rapid expansion stage overseas.

According to the European Automobile Manufacturers Association (ACEA), as of November this year, the penetration rate of new energy in Europe is only 22.5%. The penetration rate of new energy vehicles in the USA is even lower, at around 10%. Compared to the penetration rate of new energy in China, it remains at a relatively low level.

Of course, affected by the cancellation of subsidies and the unsatisfactory development of electrification technology, the penetration rates of electrification in Europe and the USA in 2024 are not expected to meet forecasts. Several international car manufacturers have also slowed down their electrification processes.

However, as previously responded by manufacturers like Mercedes-Benz to Wall Street, they are only postponing the timeline for achieving electrification goals, not abandoning electrification. Suppliers, including Contemporary Amperex Technology, still need to prepare in advance to compete for overseas market clients.

For all new energy battery manufacturers, seizing market opportunities brought by electrification in Europe and the USA in the next 5-6 years is crucial. However, according to data disclosed by SNE Research, the mainstream players in the overseas market remain dominated by Japanese and South Korean battery manufacturers such as LG New Energy, SK On, and Panasonic.

Industry insiders point out that Japanese and South Korean companies have an early and substantial international layout, with their production capacity in Europe and the USA exceeding 700 GWh by 2025. Additionally, Japanese and South Korean manufacturers fully benefit from the subsidies under the US IRA. If Chinese companies cannot quickly expand overseas, the future market landscape remains uncertain.

In the current international industrial situation, whether battery manufacturers can have production capacity near customers' overseas factories is a key bargaining chip in competing for clients. Suppliers such as Gotion High-tech, China Innovation Aviation, Sunwoda Electronic, and Eve Energy Co., Ltd. are all taking actions to establish manufacturing facilities overseas.

It can be seen that Contemporary Amperex Technology is also resolute in its overseas process. The report shows that Contemporary Amperex Technology's "significant construction projects" in Europe reach as high as 61.742 billion yuan and have entered the implementation phase.

Currently, Contemporary Amperex Technology is building a Battery factory in Hungary with a scale of 100 GWh, and recently announced a joint venture factory with Stellantis in Spain.

Sources close to Contemporary Amperex Technology indicate that objectively, compared to Japanese and South Korean manufacturers, Contemporary Amperex Technology's overseas capacity layout is still limited, thus requiring sufficient capital reserves to promote the rapid development of overseas business.

The profitability of the overseas market is also significantly higher than that of the domestic market. Based on Contemporary Amperex Technology's Earnings Reports, its gross margin for overseas business in the first half of 2024 is estimated to be 29.65%, higher than the gross margin of domestic business at 25.18% for the same period, and also a further improvement from the 25.19% gross margin of overseas business for the entire year of 2023.

With this IPO, Contemporary Amperex Technology can establish a smoother and more convenient international platform, helping it to better融入 overseas capital and empower its overseas expansion. Contemporary Amperex Technology can also bind more overseas industrial institutions through equity investments, and next year's cornerstone shareholder list can anticipate the entry of more long-term Funds and industrial Funds.

Listing on the Hong Kong stock market is also a touchstone, testing overseas investors' attitudes towards Contemporary Amperex Technology, a major player in the Global New energy industry.

Currently, the Lithium Battery Industry overseas is still a high-valuation Sector, with LG Energy's enterprise value multiple (EV/EBITDA) at 26, while Contemporary Amperex Technology's is only 14. Changjiang Securities believes that if Contemporary Amperex Technology surprises in its pricing after listing on the Hong Kong stock market, it will also bring positive feedback to the A-shares.

Moreover, in the past year, as international investors reassess the value of Chinese Assets, large enterprises like Midea Group Co., Ltd. that have had secondary listings on the Hong Kong stock market have performed well. In this market sentiment, it will also have a positive effect on attracting investors to Contemporary Amperex Technology.

Over the past six years, Contemporary Amperex Technology has thrived on the wave of China's New energy Fund industry development, earning the title of "Trillion-level Ning Wang" and creating a wealth of opportunities; next, listing in Hong Kong will be an important turning point for Contemporary Amperex Technology's overseas development. Whether it can replicate another "Ning Wang" abroad and become another typical case of a Chinese company's expansion into international markets is sure to generate anticipation.