IPO subscription in Hong Kong stocks: Analysis and subscription plan for SVOLT Energy
Jiangsu Zhenli New Energy Battery Technology Co., Ltd. (hereinafter referred to as "Zhenli New Energy") is a lithium-ion battery manufacturer focusing on the R&D, production, and sales of power batteries and energy storage batteries. The company provides integrated solutions for battery cells, modules, battery packs, battery clusters, and battery management systems, aiming to expand the wide application of electrochemical products. Zhenli New Energy's core management team has experience in the automotive parts industry, enabling them to develop a diverse matrix of electric vehicle battery products that meet OEM customers' comprehensive needs for safety, quality, performance, and cost.
The company began producing and selling battery products in 2016 and started its lithium iron phosphate (LFP) battery business in July 2022. Zhenli New Energy's power battery products cover various types of vehicles, including BEV, PHEV, EREV, and HEV. Meanwhile, its energy storage systems and marine power battery products primarily consist of LFP batteries, while its aviation battery products mainly feature high-nickel semi-solid-state lithium-ion batteries.
Use of Proceeds
Zhenli New Energy plans to raise funds through a global offering, with an estimated net proceeds of approximately HKD 927.5 million after deducting related expenses. The company intends to allocate the funds as follows:
1. Capacity expansion and construction of smart manufacturing facilities and flexible production lines: About 80.0% of the net proceeds (approximately HKD 749.1 million) will be used for capacity expansion and the construction of smart manufacturing facilities and flexible production lines. This will help the company improve production efficiency, meet growing market demand, and further consolidate its market position in the power battery sector.
2. R&D activities: Approximately 10.0% of the net proceeds (about HKD 92.8 million) will be allocated to various R&D activities. R&D is key to Zhenli New Energy's technological leadership and product competitiveness. The company will continue to invest in battery technology, new materials, new structures, and new manufacturing techniques to enhance product quality and performance while reducing costs.
3. Working capital and other general corporate purposes: The remaining 10.0% of the net proceeds (about HKD 92.8 million) will be used for working capital and other general corporate purposes to support daily operations and business development, ensuring the company can flexibly respond to market changes and business needs.
Financial Overview:
Revenue:RMB 1.499 billion in 2021, RMB 3.290 billion in 2022, RMB 4.161 billion in 2023, and RMB 5.130 billion in 2024.
Gross Profit/Loss:RMB 30.178 million gross profit in 2021, RMB 290 million gross loss in 2022, RMB 208 million gross profit in 2023, and RMB 748 million gross profit as of 2024.
Net Loss/Profit:RMB 402 million net loss in 2021, RMB 1.719 billion net loss in 2022, RMB 589 million net loss in 2023, and RMB 91.014 million net profit as of 2024.
IPO Details and Lottery Odds:
The company is offering 121.5237 million shares globally, with 300 shares per lot. As of writing, the oversubscription rate is 0.23x, with no clawback. There are 20,253.95 lots each for Group A and Group B, with an estimated 5,000-9,000 participants and a 100% lottery success rate for one lot.
Pre-IPO Investors and Cornerstone Investors:
The company completed two rounds of financing before the IPO. The Series B round was completed in August 2024, raising RMB 1 billion at a post-money valuation of RMB 18.2 billion (approximately HKD 19.398 billion), with a per-share cost of RMB 7.63, a 0.03% discount to the offer price, and a 12-month lock-up period.
The company has secured three cornerstone investors, with a total subscription of USD 79.9 million (approximately HKD 621 million), accounting for 61.79% of the offering, and a 6-month lock-up period.
Sponsors:
The IPO is jointly sponsored by CICC and CMB International, with CICC acting as the stabilizing agent. CICC's recent sponsored projects have performed well, with five consecutive gains in stabilized projects. However, this large-cap stock lacks standout appeal and may only trade sideways.
Comprehensive Review:
Zhenli New Energy's primary revenue source is power batteries, contributing RMB 4.663 billion (90.9%) in 2024. Energy storage products generated RMB 213 million (4.2%), while other products and services accounted for RMB 253 million (4.9%).
According to the prospectus, the company ranks ninth among power battery manufacturers, with a 1.8% market share, placing it at the lower end of the top 10. Except for SVOLT Energy and LG Energy Solution, all other top 10 power battery manufacturers are listed on major exchanges.
Given the numerous comparable listed companies, the data is relatively comprehensive. Logically, this stock lacks emotional appeal, as rarity drives value. However, for thoroughness, we compared the listed peers.
As shown above, Zhenli New Energy holds no advantage in market share or revenue. The sector's listed companies typically trade at a P/S ratio of 1.2-1.5, while industry leader CATL's P/S is only 2.96. Zhenli New Energy's P/S of 4.04 is clearly overvalued. Other metrics, such as gross margin, also lag behind leading peers. Adjusting the P/S to 2-2.5 to account for its smaller size and faster growth, the current valuation still needs a significant cut.
The company aims to raise HKD 1.004 billion, with cornerstone investors locking up HKD 621 million, leaving a free float of HKD 383 million. While this free float is not particularly large relative to the market cap, it pales in comparison to past HK listings with HKD 1 billion market caps and HKD 100 million free floats. Additionally, the HK market is currently in a correction phase. Comparing with previously listed power battery companies, which saw first-day price movements within ±0-3%, there is no compelling reason to participate in this IPO!
Subscription Plan:
Pass.
$ZENERGY(03677.HK)
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