Hong Kong's first power battery recycling facility has started construction, ENVISION GREEN accelerates the establishment of a global battery recycling service system

ENVISION GREEN (01783) Power Battery Recycling Business Achieves Milestone Progress. On June 14th, the "Groundbreaking Ceremony for the First Power Battery Treatment Facility in Hong Kong" jointly organized by ENVISION GREEN Holdings Limited (hereinafter referred to as "ENVISION GREEN") and its wholly-owned subsidiary Jin Yang International (Hong Kong) Limited (hereinafter referred to as "Jin Yang International") was successfully held at T2 and T3 sections of the Hong Kong Environmental Park.

As early as May 13th, ENVISION GREEN announced that Jin Yang International had acquired approximately 9,420 square meters of land use rights in the T2 and T3 sections of the Environmental Park from the Hong Kong Special Administrative Region Government on a 20-year lease basis. The land will be used for developing power battery treatment business, enhancing the industry layout of reverse supply chain management and environmental-related services.

According to Ms. Guo Ke, Managing Director of Jin Yang International, the treatment facility will utilize automated production lines with artificial intelligence technology to achieve lithium battery resource recycling. The project is expected to commence operation in 2026, with sufficient space reserved for future capacity expansion.

Mr. Guo Jinsheng, Chairman of ENVISION GREEN's Board of Directors, stated at the groundbreaking ceremony that the group is "based in Hong Kong and facing the world", constructing the first power battery treatment facility in Hong Kong at the T2 and T3 sections. This is not only a key part of the group's global service system for building the power battery recycling industry chain but also an important milestone in practicing the development of new energy resource processing and achieving sustainable development goals. Once completed, the facility will be developed into a pioneer in the recycling development of the lithium battery industry chain in Hong Kong and a leader in the power battery industry chain in the Greater Bay Area, contributing to attracting global power battery and related industry chains and supply chains.

Industry insiders expect that the commencement of the power battery treatment facility will further accelerate ENVISION GREEN's process of building a global service system for cell recycling radiating from Hong Kong to Southeast Asia and European and American markets. The company's intrinsic value will continue to grow as this business progresses.

Significant First-Mover Advantage, Expected to Become a Leader in Hong Kong's Power Battery Recycling Industry

In response to China's "dual carbon" strategy, the Hong Kong Special Administrative Region Government issued the "Hong Kong Climate Action Blueprint 2050" as early as 2021, aiming to achieve carbon neutrality by 2050. To achieve this goal, the government plans to invest HKD 240 billion over the next 15 to 20 years starting from 2022.

The transportation sector is a key area that needs to be addressed. According to the "Hong Kong Climate Action Blueprint 2050", the transportation sector in Hong Kong is the second largest source of carbon emissions, accounting for approximately 18% of the total carbon emissions in 2019. Among various types of vehicles, emissions from private cars account for 4.5%, followed by medium-duty trucks (3.2%) and franchised buses (2%) To achieve green and low-carbon transportation, the Hong Kong Special Administrative Region Government has introduced a series of measures, including reducing the first registration tax for electric vehicles and planning to stop registering private fuel cars by 2035, to encourage the development of the electric vehicle industry. These measures have already shown significant results. According to data from the Hong Kong Transport Department, by 2023, the proportion of newly registered private electric vehicles in Hong Kong had increased to 64.62%, compared to only 12.4% in 2020. In just three years, this proportion has more than quintupled, indicating the accelerating penetration of electric vehicles in the Hong Kong market.

In response to the explosive growth of electric vehicles in Hong Kong, ENVISION GREEN, with strong execution capabilities, has swiftly deployed its resources. While expanding into the construction and installation of electric vehicle charging facilities, the company also accelerated its entry into Hong Kong's market for recycling power batteries in 2022.

Regarding licensing, ENVISION GREEN actively collaborated with the government to establish industry standards and regulations for the recycling of power batteries. In 2022, the company obtained the first complete set of licenses for the disposal, transportation, and export of power batteries in Hong Kong, with an approved total dismantling capacity that is leading in the industry.

In terms of retired battery channels, ENVISION GREEN has strategically partnered with global leading new energy vehicle companies starting with the letter "T" and other top new energy vehicle manufacturers. This collaboration has positioned ENVISION GREEN as the service partner for battery recycling in the Hong Kong market for these companies. By securing partnerships with leading vehicle companies early on, ENVISION GREEN has gained a significant competitive advantage.

Winning the bids for the T2 and T3 sections of the Hong Kong Environmental Protection Park not only signifies the Environmental Protection Department's recognition of ENVISION GREEN's strength in battery recycling but also plays a crucial role in accelerating the expansion of ENVISION GREEN's battery recycling business.

As the Environmental Protection Park is the first infrastructure in Hong Kong specifically built for the development of the recycling industry, it imposes strict qualifications on entering companies. These companies must align with the government's green transformation and new industrialization goals, and meet high requirements for technological innovation.

Given the scarcity of land in Hong Kong's manufacturing sector, the Environmental Protection Park's unique positioning and functions allow for long-term land use at affordable rents for tenants, ensuring their sustainable development. The park's land comes with basic infrastructure and public facilities, facilitating the rapid expansion of businesses.

To support the accelerated popularization of electric vehicles by the SAR government, it is essential to have power battery recycling companies in the Environmental Protection Park. Additionally, the park houses various environmental and recycling companies, promoting synergies among tenants. Its proximity to the port facilitates the import and export of products and raw materials. Building processing facilities in the park not only benefits the establishment of the ENVISION GREEN brand but also aids in expanding future markets.

Data shows that as of the end of December 2023, the total number of electric vehicles in Hong Kong was 76,395, accounting for only 8.3% of all vehicles! With the penetration rate continuing to accelerate, there is still ample room for development in the electric vehicle market. Power battery recycling, as a typical lithium battery end-of-life service, is on the verge of explosive growth, making it an opportune time for market players to strategize Unlike the competitive landscape in the mainland market, Hong Kong has the characteristics of high land prices and high labor costs, which place high demands on the operational capabilities of market participants. The entry barriers are significantly raised, making the battery recycling market in Hong Kong a true "blue ocean" market.

Looking ahead, according to the "Hong Kong Electric Vehicle Popularization Roadmap," Hong Kong is set to stop registering private fuel cars by 2035, with all private cars expected to be electrified by then. If we calculate based on the current 650,000 private cars being fully electrified, the battery disposal and recycling market in Hong Kong is already at a billion-dollar level by 2035.

This is a very conservative estimate. With the future introduction of talent and relaxed residency policies in Hong Kong over the next decade, along with the continuous increase in the number of cars, it is estimated that the number of private car registrations in Hong Kong by 2035 may exceed 1 million. By the end of December 2023, there were also 277,500 registered vehicles including taxis, buses, and other vehicles besides private cars. If this portion also transitions to electric vehicles, it will further expand the scale of the battery recycling market in Hong Kong.

ENVISION GREEN has already established significant first-mover advantages and competitive barriers in various aspects such as licenses, battery channels, and industrial chain synergy. The future vision revealed in recent announcements is gradually unfolding: with nearly 10,000 square meters of industrial land, if a battery cell recycling production line is built, ENVISION GREEN will have the key capabilities to optimize costs, innovate in technology, and upgrade iteratively. Considering market development stages, industrial landscape, competitive advantages, and other dimensions, ENVISION GREEN will undoubtedly be the largest local battery cell recycling company in Hong Kong and has the potential to radiate across Asia.

The value of global energy recycling layout is beginning to be unleashed

In fact, the business in Hong Kong is just the tip of the iceberg of ENVISION GREEN's grand battery recycling business map. Its strategic layout for energy recycling globally, based in Hong Kong, is showing initial progress, with significant developments in the European, American, and Southeast Asian markets.

As early as February 19th this year, ENVISION GREEN announced that it had signed a memorandum of understanding with Guoxuan High-Tech's wholly-owned subsidiary, Guoxuan Hefei, to jointly develop and promote battery recycling business globally. As of now, ENVISION GREEN has initiated negotiations with local established companies on channel-related matters. If successful, ENVISION GREEN can leverage the partner's licenses and network to quickly establish new channels, accelerating the localization of its business, which will facilitate the rapid expansion of its overseas markets.

Industry insiders believe that given the current industry situation, once ENVISION GREEN's overseas battery recycling business gets on track, it may see sustained growth. Firstly, cooperation with Guoxuan High-Tech and other battery cell manufacturers will bring significant performance growth certainty. According to previous production capacity planning data from Guoxuan High-Tech, its global battery capacity is expected to reach around 300GWh by 2025, with 200 GWh in China and 100 GWh overseas. Guoxuan High-Tech's rapid expansion overseas will help drive the rapid development of ENVISION GREEN's overseas battery recycling business Secondly, the trend of domestic battery manufacturers going global is still ongoing, and ENVISION GREEN is expected to serve more battery enterprises to go global with peace of mind. Currently, almost all of the top ten battery manufacturers in China have announced plans to build overseas factories. According to incomplete statistics from BatteryChina, as of November 2023, the planned overseas production capacity of leading domestic battery companies exceeds 552.5GWh. However, in the context of local companies lacking the necessary recycling technology or experience to effectively recycle and process lithium batteries, how to efficiently achieve the recycling and utilization of lithium batteries is one of the pain points faced by battery enterprises going global. The cooperation between ENVISION GREEN and CATL opens up a new approach to solving this pain point issue, forming a new business model. ENVISION GREEN is expected to expand its customer base of overseas battery factories based on this.

Furthermore, in relatively mature industrial systems in overseas markets, channels are one of the most critical core competitive advantages in the battery recycling business. With the establishment of ENVISION GREEN's channels and the expansion of its business, it can also leverage its channel and technological advantages to serve local battery manufacturers, further opening up the company's future growth space. According to data from CICC, China's retired power batteries will peak around 2026, and the period of high-volume recycling of power batteries in major new energy vehicle industries in global major countries such as Europe and the United States will also follow. This lays a solid foundation for ENVISION GREEN to explore overseas local battery manufacturers in the future.

It is worth noting that the profitability of the overseas power battery recycling industry is significantly higher than that of the domestic market. Mainland China's intense and fragmented competition suppresses and hinders the profitability of peer companies. In contrast, overseas markets have a more complete top-level design, a relatively mature industrial system, higher market access conditions, relatively mild competition among industry players, and more guaranteed profitability. Therefore, they also enjoy a higher valuation premium in the capital market.

In addition to the European and American markets, ENVISION GREEN has already started negotiations with leading global new energy vehicle manufacturers to jointly explore the Southeast Asian market. If future progress can be gradually realized, ENVISION GREEN's global service system for lithium battery recycling and utilization, starting from Hong Kong and radiating to Southeast Asia and Europe and America, will officially take shape.

Summary

According to Zhitong Finance, several prominent figures from the Hong Kong political scene attended the groundbreaking ceremony, including Mr. Tse Chin-wan, Secretary for the Environment and Ecology, BBS, JP, Executive Council member, Chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, and Legislative Council member Chan Hak-kan, SBS, JP, Dr. Xu Haoguang, Director of the Environmental Protection Department, JP, Chairman of the Legislative Council's Environmental Affairs Committee, and Legislative Council member Lo Wai-kwok, among others.

Executives from Hong Kong Environmental Park, China Resources Environmental Technology, Tesla (Hong Kong), CATL, China Machinery Equipment (Hong Kong), American Fulin, Huayou Recycling, Hong Kong Automobile Association (including most Hong Kong automobile brands), and the Hong Kong Recycling Resources General Chamber of Commerce also attended, witnessing the official launch of the first power battery processing facility.

Hong Kong Chief Executive Carrie Lam recently pointed out, "We must fully leverage Hong Kong's basic research and development capabilities and international advantages to promote the development of new quality productivity." With the strong support of the Hong Kong government and the assistance of partners, ENVISION GREEN's power battery disposal project is believed to achieve overtaking on the curve in the field of new energy, especially lithium batteries, in Hong Kong The rising star in high-value investment and output.

Director Xie Zhanhuan congratulated JinYang International on winning this project. He pointed out that Hong Kong will move towards a low-carbon green transformation in the future and needs to seize the opportunity to adapt to the changing times. He affirmed JinJing New Energy's active grasp of the important opportunity to develop the green industry, making contributions to Hong Kong's battery recycling industry, as well as contributing to the circular economy development of the Greater Bay Area and the motherland.

Looking back at JinJing New Energy's business transformation strategy initiated since 2021, it is gradually taking shape.

From the perspective of business layout, as a leader in the local green energy infrastructure field in Hong Kong, JinJing New Energy has keenly perceived the new industrial opportunities brought by China's "dual carbon" strategy. Leveraging its first-mover advantage and synergistic advantages, it quickly deployed its layout, establishing a diversified business system including integrated services for building energy efficiency, infrastructure and installation of electric vehicle charging facilities, development and application of new energy storage systems, and disposal and recycling of power batteries. This has formed a sustainable development model and framework spanning the three major tracks of smart buildings, green transportation, and circular economy, opening up multiple new growth curves for the company's future.

From the perspective of the capital market, investors highly recognize the significant increase in JinJing New Energy's intrinsic value due to its transformation. Therefore, since 2021, JinJing New Energy's stock price has achieved four consecutive years of growth, with annual increases of 103%, 285%, 236%, and 142% respectively. However, the current market value of just over HKD 6.2 billion may still not fully reflect JinJing New Energy's true intrinsic value.

Within the sustainable development model framework it has built, the disposal and recycling of power batteries are key links to achieving circular development of its entire business model and are essential conditions for continuously empowering the core business of the group. With the continuous advancement of the global service system for the large-scale lithium battery recycling and recycling from Hong Kong to Southeast Asia and European and American markets, JinJing New Energy's intrinsic value will experience accelerated release. At present, it may only be the starting point for JinJing New Energy to advance as a global leading provider of smart energy solutions