IPO Pricing | Tianqi Lithium received 9.3 times subscription, priced at HKD 82 per share

Futu News reported on July 12, this Tuesday$TIANQI LITHIUM (09696.HK)$The company announced the issuance of 164 million shares at HKD 82 per share, with a minimum board lot of 200 shares, and an expected listing date of July 13.

During the public offering phase, Tianqi Lithium received 9.3 times subscription. The final number of shares allocated to the public offering was 16.4124 million shares, accounting for approximately 10% of the total number of offer shares (before any over-allotment option is exercised). A total of 20,100 valid applications were received, with a 100% success rate for one-lot applications.

In addition, the international offering has been oversubscribed, with the final number of shares offered being approximately 148 million shares, representing about 90% of the total number of shares offered (before any exercise of the over-allotment option). Futu has compiled the relevant data in the table below:

In terms of use of proceeds, the company plans to allocate the net proceeds from the global offering (after deducting related expenses), which are approximately HKD 13.062 billion, for the following purposes: approximately HKD 8.865 billion will be used to repay the outstanding balance of SQM debt; approximately HKD 1.17 billion will be allocated to fund Phase I construction of the Anju factory; approximately HKD 1.721 billion will be used to repay certain domestic bank loans in China with interest rates between 4.35% and 5.49% and maturity dates ranging from September 2022 to June 2025, which were utilized for working capital and the construction of the Tianqi Global R&D Center in Tianfu New Area, Chengdu, China; HKD 1.306 billion will be used for working capital and general corporate purposes.

The company is a leading lithium producer in both China and globally. According to the Wood Mackenzie report, the company is the only lithium producer in China that achieves 100% self-sufficiency and full vertical integration through a large, consistent, and stable supply of lithium concentrate.

With high-quality and low-cost lithium concentrate from the Greenbushes mine, the company is able to achieve self-sufficiency in lithium raw materials and efficiently produce high-quality lithium compounds and derivatives. According to the Wood Mackenzie report, based on lithium concentrate production volume in 2021, Tianqi Lithium's subsidiary, Talison, is the world's largest lithium mining operator; based on 2021 production, the company ranks as the fourth-largest lithium compound producer globally and the second-largest in Asia; based on revenue generated from lithium in 2021, the company ranks third.

Through its subsidiary Talison, the company has obtained the mining rights to the Greenbushes lithium mine. In terms of production and reserves as of the end of 2021, the Greenbushes mine is the largest lithium mine globally. According to the Wood Mackenzie report, it was also the lowest-cost large-scale lithium mining producer globally in 2021.

As of the latest practicable date, the company holds a 22.78% stake in SQM, making it the second-largest shareholder of SQM. According to the Wood Mackenzie report, based on 2021 production, SQM is the largest brine-based lithium compound producer globally. According to the Wood Mackenzie report, in terms of production costs, SQM is also one of the lowest-cost lithium carbonate producers globally in 2021.

In terms of financial performance, from 2019 to 2021, the company’s total revenues were RMB 4.816 billion, RMB 3.215 billion, and RMB 7.598 billion respectively, reflecting a compound annual growth rate of 25.6%. The company recorded net losses of RMB 5.48 billion and RMB 1.125 billion in 2019 and 2020, respectively, but turned profitable in 2021, recording a net profit of RMB 4.206 billion.

In terms of the industry, 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, reaching a total of 1.07 million tons LCE by 2026.

Regarding lithium pricing, from the demand side, downstream electric vehicles and energy storage markets continue to show strong growth momentum, and lithium demand remains robust. Although major lithium producers have been expanding capacity and new resource developments are underway, the release of supply-side capacity takes time, and upstream resource development involves many uncertainties. It is expected that lithium prices will remain at relatively high levels in the short term.

One of the main end markets for lithium products, passenger electric vehicle sales, is expected to continue rising. The compound annual growth rate from 2022 to 2026 is projected to be 17.1%, with an 8.7% compound annual growth rate from 2027 to 2032.

The lithium-ion energy storage systems market is expected to grow at a CAGR of 44.2% during 2022-2026, and a CAGR of 23.7% during 2027-2032.

Further Reading:Infographic | Tianqi Lithium's IPO in Hong Kong: A leading lithium producer in China and globally

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