CATL intimate partner Lopal Technology is attempting to break free from its current predicament.
On April 29, Jiangsu Lopal Technology Co., Ltd. (603906:SH), which has been listed on the A-share market for seven years, submitted an application for a main board listing to the Hong Kong Stock Exchange, intending to conduct an "A+H" listing, with Guotai Junan International and Kaisa Capital acting as its joint sponsors. On October 24 last year, Lopal Technology submitted its initial application to the Hong Kong Stock Exchange for a main board listing.
The prospectus shows that Lopal Technology plans to use the funds raised in this IPO to invest in the second phase of its lithium iron phosphate cathode material factory in Indonesia, the construction of a new lithium manganese iron phosphate production line at its Xiangyang factory, and to repay loans and supplement operating capital.
Starting in 2021, Lopal Technology, which ventured into cathode materials, soared with the rising price of lithium, achieving continuous growth in performance and briefly becoming the world's third-largest lithium iron phosphate cathode material manufacturer. However, the company's performance took a sharp downturn thereafter.
According to Lopal Technology's disclosed performance for the first quarter of 2024, the company incurred a loss of CNY 78.04 million. The announcement shows that in the first quarter of this year, Lopal Technology's revenue decreased by 29.24% year-on-year to 1.474 billion yuan, resulting in a net loss of CNY 78.045 million, a year-on-year narrowing of 64.96%, mainly due to the reduced losses in the lithium iron phosphate cathode material business.
Looking back at the 2023 financial report, Lopal Technology's performance was also unsatisfactory. In 2023, Lopal Technology's total revenue fell by 38% to CNY 8.729 billion, turning from profit to a net loss, recording a net loss attributable to the parent company of CNY 1.233 billion, marking the company's first-ever loss, while it had a net profit of CNY 753 million in 2022. This is related to multiple chain reactions in the industry since 2023, including the slowdown in the growth rate of the terminal new energy vehicle market, a 0.4 yuan/Wh drop in cell prices, and extreme cost reduction in battery manufacturing, causing profit margins to shrink for midstream cathode material enterprises, and performance pressure has become a common phenomenon.
Lopal Technology started with lubricating oil and engine coolant. In 2017, Lopal Technology made its debut on the A-share market, listing on the Shanghai Stock Exchange main board. At that time, Lopal Technology's business categories expanded to include diesel engine exhaust treatment fluid and automotive maintenance products, but still remained limited to automotive fine chemicals.
Around 2021, Lopal Technology reached a turning point in its performance. In the second half of 2020, Lopal Technology began to venture into the lithium iron phosphate cathode material business. Previously, Lopal Technology employed third-party contract manufacturers to produce a small amount of lithium iron phosphate cathode material, generating revenue of about CNY 42 million.
In mid-2021, before the surge in lithium prices, Lopal Technology acquired all the equity of Tianjin BTR Nano and Jiangsu BTR Nano from BTR, with a total transaction price of approximately CNY 844 million. As of May 31, 2021, the net assets of the targets of the acquisition amounted to approximately CNY 611 million, with a premium of about 38%. That year, Lopal Technology's operating income was about CNY 4.054 billion, achieving a net profit attributable to the parent company of about CNY 433 million, both showing growth of over 70%. Among them, Lopal Technology's sales of lithium iron phosphate cathode materials in 2021 generated revenue of about CNY 1.877 billion, accounting for approximately 46.3%.
In 2022, lithium prices surged, with the average price of lithium carbonate rising from CNY 119,800 per ton in 2021 to CNY 482,400 per ton in 2022, while the average selling price of lithium iron phosphate cathode materials also increased from CNY 55,000 per ton to CNY 125,000 per ton, a growth of over 127%. Under the industry's upswing cycle, Lopal Technology's operating income reached CNY 14.072 billion in 2022, with sales revenue from lithium iron phosphate cathode materials reaching CNY 12.243 billion, suddenly accounting for 87%. At the same time, Lopal Technology's annual net profit exceeded CNY 1 billion.
According to the data disclosed by Frost Sullivan, in terms of sales volume, in 2022, Lopal (Longpan Technology) was the world's third-largest manufacturer of lithium iron phosphate cathode materials, with a market share of 8.6%. As a company that has only entered this industry a year and a half ago, this achievement demonstrates substantial strength and credibility.
Following the shift of lithium iron phosphate cathode material sales to become Lopal Technology's main business, downstream players in the industry chain, such as lithium battery manufacturers like CATL, REPT, SUNWODA, and EVE Energy, have become the company's primary customers. From 2021 to 2023, Lopal Technology's sales revenue from CATL reached CNY 1.16 billion, CNY 7.487 billion, and CNY 2.648 billion respectively, accounting for 28.6%, 53.2%, and 30.3% of the company's total revenue. Apart from procurement, CATL also jointly established Longpan CATL for lithium carbonate production with Lopal Technology.
However, according to Wind data, since 2021, the price of domestic lithium iron phosphate cathode materials has exhibited a "figure-eight" trend, reaching a peak at the end of 2022 and then declining continuously. Although the price has remained stable since the beginning of this year, it has fallen to the level of early 2021, plummeting by over 70% from its peak in 2022. Lopal Technology naturally has not been immune to this trend. Despite an increase in sales volume of lithium iron phosphate cathode materials in 2023, the average selling price suffered a drastic cut, dropping from 128,700 CNY/ton in 2022 to 62,500 CNY/ton in 2023. Alongside operating losses, the company's financial pressure has significantly intensified due to earlier large-scale expansion.
In an effort to overcome the company's predicament, Lopal Technology is attempting to develop its presence in overseas markets. Personnel from Lopal Technology's securities department stated that despite domestic overcapacity, there is significant room for growth in overseas markets, and the company is now focusing more on international expansion, which is seen as the best way for the company to overcome its challenges.
"At present, the construction of a lithium iron phosphate factory in Indonesia is underway, providing Lopal Technology with a clear first-mover advantage in overseas expansion," said Ye Xin, an independent director of Lopal Technology. There has also been definite progress in introducing overseas customers, with the company formally entering LG Energy Solution's supplier system and conducting trials with several other internationally renowned battery manufacturers.
As of the time of publication, Lopal Technology's stock is priced at CNY 10.10 per share, with a total market value of CNY 5.707 billion.