IPO pricing | China Graphite is 26.51 times subscribed, priced at HK $0.325 per share

Futu News, July 15, this Friday.$CHINA GRAPHITE (02237.HK)$The company issued 400 million shares at a price of HK $0.325 each at 10000 shares, which is expected to be listed on July 18.

China Graphite was 26.51 times subscribed at the public offering stage, and the final number of offer shares allocated to the public offering was 120 million shares, accounting for about 30 per cent of the total number of offer shares (before any over-allotment option was exercised). A total of 11851 valid applications were received, with a success rate of 30.01%.

In addition, the international offering has been oversubscribed and the final number of offer shares is about 280 million shares, equivalent to about 70 per cent of the total number of shares offered (before any over-allotment option is exercised). Futu Information collates the relevant data as follows:

In terms of fund-raising purposes, the company will collect about HK $84 million net from the global sale for the following purposes: of this amount, about 32.4% will be used for land acquisition costs; about 31.6% of this will be used for construction costs; of this amount, about 36.0% will be used for the purchase and installation of machinery and equipment.

The company is engaged in the production and sales of flake graphite concentrate and spherical graphite in China. The origin of the company can be traced back to 2006, when the company launched the mineral processing and sales operation of flake graphite concentrate (mainly with a carbon content of 94% to 96.8%) in the name of Yixiang graphite. The company expanded its business in 2012, processing and selling spherical graphite (mainly with a carbon content of more than 99%) in the name of Yixiang New Energy.

Due to the high carbon content of the company's flake graphite concentrate, it is used in heat-resistant materials and spherical graphite and used as negative electrode materials for electronic devices and lithium-ion batteries for new energy vehicles. As a by-product of its spherical graphite processing, the company also sells micro graphite powder and high purity graphite powder.

Financially, the company's revenue for the years ended 31 December 2019, 2020 and 2021 was RMB124 million, 169 million and 198 million respectively, while the net profit for the same period was 24.549 million, 37.859 million and 53.325 million respectively.

In the industry, due to the increase in the application of new energy vehicles and energy storage systems, China's lithium-ion battery market is expected to grow rapidly. Therefore, the demand for flake graphite concentrate will further increase. Since 2017, the sales and earnings of flake graphite concentrate in China have increased steadily. In 2021, the sales volume and revenue of flake graphite concentrate were 542 kilotons and 2.239 billion RMB respectively.

Driven by opportunities such as favorable policies for the industry, advances in graphite manufacturing technology and increased demand in the downstream industry, sales of flake graphite concentrate are expected to increase from 604 kilotons in 2022 to 827 kilotons in 2026 at a compound annual growth rate of 8.2%. Sales revenue will increase from 2.525 billion yuan in 2022 to 3.465 billion yuan in 2026.

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