IPO Update | Tianqi Lithium passes hearing, set to become the largest IPO in Hong Kong's stock market this year

Futu News report on June 20: The Hong Kong Stock Exchange’s official website shows that$TIANQI LITHIUM (09696.HK)$has passed the hearing. Morgan Stanley, CICC, and China Merchants Bank International are the joint sponsors.

Company Overview

Tianqi Lithium is a leading lithium producer in China and globally, listed on the Shenzhen Stock Exchange since August 31, 2010 (Stock Code: 002466). The company’s products are mainly divided into two categories: lithium concentrates and lithium compounds and their derivatives. According to the Wood Mackenzie report, based on lithium concentrate production in 2021, the company ranks as the fourth-largest global and second-largest Asian lithium compound producer, with market shares of 7% and 12%, respectively.

The company's main customer base includes battery material producers, multinational electronics companies, and global glass manufacturers. In terms of production volume in 2021, the company is the world's second-largest supplier of battery-grade lithium carbonate and one of the top ten global suppliers of battery-grade lithium hydroxide.

The company boasts excellent R&D capabilities, with a core team composed of experts with extensive experience in scientific fields crucial to lithium product development, such as materials engineering, chemical engineering, and metallurgy. The company currently holds 166 authorized patents.

Financial Condition

According to the prospectus, Tianqi Lithium’s total revenue from 2019 to 2021 was RMB 4.816 billion, RMB 3.215 billion, and RMB 7.598 billion, respectively, representing a compound annual growth rate of 25.6%. The company incurred net losses of RMB 5.480 billion and RMB 1.125 billion in 2019 and 2020, respectively, but generated a net profit of RMB 4.206 billion in 2021.

Industry Overview

According to the Wood Mackenzie report, global annual lithium demand is expected to grow at a compound annual growth rate of 15.4% from 2022 to 2026.

Strong demand for lithium carbonate used in lithium-ion batteries has driven producers to target the production of battery-grade lithium carbonate, which accounted for 49% of total lithium carbonate production in 2021. This trend is expected to continue, with the proportion rising to 59% by 2032.

In 2022, the expected contract pricing for battery-grade lithium carbonate continued to increase, with an anticipated average contract price of USD 28,336 per ton, rising to a high of USD 40,671 per ton in 2023, representing a growth rate of 43.53%.

Due to new supply entering the market, contract prices for battery-grade lithium carbonate are expected to stabilize, followed by a price decline over the next decade. However, due to continued rising demand, a supply shortage is anticipated around 2030, leading to a recovery in price increases.

Equity Structure

Data from Tianyancha shows that Tianqi Lithium has completed three rounds of financing, with investors including China Construction Bank and China Securities Finance Corporation.

In terms of equity structure, Tianqi Group holds 28.18% of the company’s shares, other A-share shareholders hold 67.17%, and Ms. Zhang Jing holds 4.65% of the shares.

Use of Proceeds

The company plans to use the net proceeds from the fundraising for the following purposes: repaying the outstanding balance of SQM debt and related transaction fees; funding the first phase of construction at the Anju plant; working capital and general corporate purposes.

Prospectus link:

https://www1.hkexnews.hk/app/sehk/2022/104167/documents/sehk22061900139_c.pdf

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