China Aviation Lithium Battery wins Hong Kong bourse approval for US$2 billion IPO

If successful, the No. 3 battery maker in China could become the second-largest IPO in Hong Kong this year
Backed by state-owned aerospace giant Aviation Industry Corp of China, CALB plans to raise funds to ramp up production capacity

IPO

Georgina Leein Hong Kong,Daniel Renin ShanghaiandPeggy Sitoin Hong Kong

Published: 6:00am, 9 Sep, 2022

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China Aviation Lithium Battery (CALB), the country’s third-largest electric vehicle (EV) battery maker, won approval from the Hong Kong stock exchange’s listing committee on Thursday for a share sale that could raise up to US$2 billion, sources close to the deal said.

CALB’s Hong Kong share sale would follow the initial public offering (IPO) by lithium ore miner and EV battery maker Tianqi Lithium, which raised US$1.7 billion in July. If successful, CALB could become the second-largest IPO in the city this year, after China Tourism Group Duty Free’s US$2.1 billion deal.

CALB declined to comment whether the application was approved.

Unlike Tianqi Lithium, which is also listed in Shanghai, Jiangsu-based CALB has never been listed elsewhere.

The Connect Hall at Hong Kong Exchanges and Clearing in Central, Hong Kong. CALB could become the city’s second-largest initial public offering this year. Photo: SCMP / Jonathan Wong

“Demand for EV batteries in China will continue to increase amid surging sales of battery-powered vehicles,” said Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. “As the No. 3 player in the domestic EV battery industry, CALB needs fresh capital to propel growth and increase market share.”

The company was co-founded in 2015 by a unit controlled by Aviation Industry Corp of China (AVIC), the state-owned conglomerate that makes fighter jets for the military and owns about 10 per cent of CALB. Other shareholders include the local government of Jinta district in northeastern Jiangsu province.

“We plan to use the proceeds to build up and expand a number of production base projects for EV batteries and energy storage systems,” the company said in the draft document, adding that it intends to ramp up production capacity to 25 gigawatt-hours (GWh) of batteries per month by the end of this year, from 1.2 GWh as of January.

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CALB’s share sale may coincide with that of Leapmotor, a Zhejiang-based electric vehicle start-up which may kick off its IPO this month to raise up to US$1.5 billion, according to a source close to the deal.

CALB counts Leapmotor, Geely Auto’s affiliate Viridi E-mobility Tech (Ningbo) and Guangzhou Automobile Group’s EV marque Aion as customers, according to its draft filing to the exchange.

China’s EV battery market is highly concentrated, with the top three manufacturers accounting for 74 per cent of the total EV battery capacity in 2021, according to consultant Frost & Sullivan, cited by CALB in its draft prospectus.

Contemporary Amperex Technology (CATL), the world’s largest EV battery maker, supplied 13.3 GWh of batteries in July, followed by BYD’s 6.4 GWh, according to data by Seoul-based SNE Research.

CALB was ranked third with EV battery output of 2.1 GWh in July, less than a third of BYD’s volume and just 16 per cent of CATL’s.

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CALB reported 111.5 million yuan (US$16 million) in net profit in 2021, turning around from a net loss of 18.3 million yuan in 2020.

A successful IPO by CALB would be a shot in the arm for Hong Kong Exchanges & Clearing, which is forecast to rank as the fourth-largest listing venue globally for the first nine months this year by Deloitte, after not even making it to the top five in the first half due to a dearth of billion-dollar IPOs. The Hong Kong bourse operator regained some ground in the third quarter, thanks to the Tianqi Lithium and China Travel Group Duty Free IPOs.

Huatai International is the sole-sponsor for the deal. The brokerage, together with Citi, Credit Suisse and JPMorgan are the joint global coordinators.