Breaking a number of South Korean IPO records, LG New Energy landed on the Korean Stock Exchange just like the Ningde Times Junlin A shares in that year
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Wen | Li Yang
Edited | Shi Zhiliang
On January 27, LG Energy Solution (hereinafter referred to as LG Energy Solution; stock code KOSPI: 373220), a subsidiary of LG Chem, officially landed on the Korea Stock Exchange, and the opening stock price after listing was reported at 597,000 won/share, an increase of 99% compared with the previous issue price of 300,000 won/share.
LG New Energy's total fundraising reached $11 billion, and its listing became the largest IPO in the history of South Korea's capital market. After the listing of LG New Energy, its market value also reached 116.8 trillion won (about 616.9 billion yuan).
According to data released by SNE Research, a South Korean market research institute, from January to November 2021, LG New Energy ranked second in the world with a market share of 20.05%, second only to CATL (31.8%). As the world's second largest power battery supplier, LG New Energy plans to reach 430GWh of power battery production capacity by 2025, of which the production capacity of the United States is 155GWh, Europe is 145GWh, and the other 130GWh capacity will be in China, South Korea and Hyundai Motor Indonesia joint ventures.
China is an important market for LG's new energy layout. LG New Energy told Caijingqiche (ID: caijingqiche) that "At present, LG New Energy has three factories in China, all located in Nanjing, and the batteries supplied by LG New Energy to Tesla China are also produced in Nanjing."
LG New Energy became a domestic Tesla battery supplier in 2019, and in 2020, with the surge in sales of domestic Teslas, the global share in the first half of the year once surpassed the Ningde era and reached the top of the world. After the listing of LG New Energy, it made up for the shortcomings of its own lack of profitability and used more capital and ammunition for expansion, and the Ningde era encountered competitors in the true sense.
For the listing of LG New Energy, the capital level gave a more optimistic evaluation. Cho Byung-Hyun, an analyst at Wondae Securities Korea, said, "This is a stock that must be bought. However, as of the close of trading on Friday, LG New Energy's stock price has fallen to 450,000 won per share, with a market value of 105.3 trillion won, about 555 billion yuan (the following won or US dollar will be marked, in addition to the RMB unit).
Why rise?
LG New Energy's lithium battery research can be traced back to 1995 when LG New Energy was only a battery business unit of LG Chem, and four years later (1999) achieved mass production of lithium-ion batteries.
In the first decade of the 20th century, the global power battery pattern was that Korean companies continued to encroach on the share of Japanese companies; the second decade was that Chinese battery companies continued to encroach on the market share of Japan and South Korea.
In 2020, LG Chem seized the window period of discredit between Tesla and Panasonic cooperation, and with higher cost performance and active expansion plans, broke the situation of Panasonic's exclusive supply of Tesla and became a battery supplier for domestic Tesla.
With the domestic Tesla listing volume, as well as the Volkswagen ID series equipped with LG batteries, Renault Zoe, Hyundai Kona and other new energy models sold well in the European market, LG Chem once led the Ningde era in the global market. Even if the Ningde era is full of firepower, in the whole of 2020, LG Chem will only have a market share gap of 1.2% that is slightly inferior to the Ningde era.
In December 2020, LG Chemical Battery Division, which is in the global power battery field, decided to split into an independent wholly-owned subsidiary, LG Energy Solutions, and prepared to go public for financing, and Jin Zhong, head of LG Chemical Battery Division, is now the CEO.
Six months after its establishment, LG New Energy submitted a listing application to the Korea Stock Exchange, which is scheduled to be completed by the end of 2021, but this listing plan was quickly broken by a large-scale recall.
At the end of July 2021, GM announced that it would recall nearly 69,000 Bolt electric vehicles produced between 2017 and 2019 nationwide due to production defects in the battery packs on board; a month later, GM expanded the recall again. The battery supplier of the universal Bolt electric vehicle is LG New Energy.
After the recall, the former CEO of LG New Energy, Jin Zhong, now stepped down, and LG New Energy immediately organized a board of directors and an extraordinary shareholders' meeting, and appointed Quan Yingshou, vice president of LG Group, as the new CEO of LG New Energy. At the same time, LG New Energy's listing plan was suspended. "We are reviewing the application but cannot provide information about the reason for the delay." For LG New Energy to be suspended, South Korean exchange LG New Energy has publicly stated so.
Fortunately, LG New Energy did not make the industry wait too long. On January 27, 2022, LG New Energy was officially listed. On the opening day of the listing, the stock price soared 99%, with a market value of 750 billion yuan, becoming the second largest listed company in South Korea, and its weight in the constituent stocks of KOSPI's Korean main board will be second only to Samsung Electronics.
At the same time, LG New Energy's total fundraising reached $11 billion, and its listing itself became the largest IPO in the history of the Korean capital market.
South Korea's KB Securities said that from January 1 to January 10, when LG New Energy began to accept investor subscriptions, the number of newly opened accounts increased by nearly 200% compared with the same period a month ago.
On January 19, LG New Energy's IPO subscription application for retail investors ended on the same day, and the cumulative subscription amount and number of subscribers reached the highest record in South Korea. In addition, LG New Energy also received about $12.8 trillion in subscriptions from 1988 domestic and foreign institutional investors, also setting a new record.
LG New Energy's record-breaking IPOs are the same as the A-shares landing in the Ningde era in 2018. Its CEO Quan Yingshou promised that it would surpass the NINGDE era in terms of global market share and become the world's first.
According to the LG New Energy prospectus, as of the third quarter of 2021, LG New Energy has achieved revenue of about 71.034 billion yuan in the same year, an increase of 63.3% year-on-year, and the net profit from 2019 to the first three quarters of 2021 was -2.269 billion yuan, -2.375 billion yuan and 4.538 billion yuan, respectively.
Net revenue has exceeded Ning
Backed by LG Group, which is listed as the four major consortiums in South Korea alongside Samsung, Hyundai and SK, and has the second largest power battery market share in the world, LG New Energy was once considered the biggest opponent in the Ningde era.
As early as the first half of 2020, LG New Energy surpassed the Ningde era in the global market with Tesla's god assist, and in the first half of 2021, LG handed over a semi-annual report that looked better than the Ningde era.
LG Chem's financial report shows that in the second quarter of 2021, LG's energy solution business revenue increased by 82% to 28.27 billion yuan, and profit increased 5 times to 4.52 billion yuan; in the first half of the year, LG's revenue was about 51.83 billion yuan and net profit was about 6.42 billion yuan. In the Ningde era, which has a higher market share, in the first half of the year, it can only hand over a report card of 44.075 billion yuan in revenue and 4.484 billion yuan in net profit.
Some insiders told Caijingqiche that "the revenue of the Ningde era is not as good as LG, mainly because the lower-cost lithium iron phosphate battery occupies a larger market share in the battery products of the Ningde era, while LG's products are all higher-priced ternary lithium batteries, and the installed capacity of high-end batteries 811 ternary cells accounts for a relatively high proportion."
In this regard, ningde times people told caijingqiche (ID: caijingqiche), "LG energy's business includes energy storage batteries, power batteries and consumer batteries, Ningde times do not involve consumer battery business, only look at energy storage and power battery business, LG energy's profitability is not good." It is worth mentioning that ATL, a brother company of the Ningde times, is also a leading enterprise in the field of consumer batteries.
Although LG New Energy's revenue advantage mainly comes from the moisture of business division, the threat of LG new energy battery products to the Ningde era is real.
On January 25 this year, LG New Energy and General Motors announced that they will invest US$2.6 billion (about 16.45 billion yuan) to establish a third joint venture power battery plant in the United States, with a plan to achieve a first phase of mass production in early 2025, which is expected to meet the demand for about 700,000 high-performance new energy vehicles.
Up to now, LG New Energy has a production base layout in China, South Korea, the United States, Europe, Indonesia, according to the planning of LG New Energy, in 2025 the power battery production capacity will reach 430GWh, of which the production capacity of the United States is 155GWh, Europe is 145GWh, and the other 130GWh production capacity will be in China, South Korea and Hyundai Motor Indonesia joint ventures.
In contrast, in the Ningde era, although the total production capacity will exceed 600GWh in 2025, higher than LG new energy, its production capacity is concentrated in China, and it has gradually been built overseas in recent years. With the gradual increase in sales of overseas new energy vehicles, the overseas advantages of LG New Energy will be further highlighted.
The domestic market, the Ningde era may not be solid. In June 2019, the Ministry of Industry and Information Technology issued a document abolishing the "Automotive Power Battery Industry Specification Conditions" (commonly known as the white list, that is, only battery companies in the white list can enter the "Recommended Catalogue for the Promotion and Application of New Energy Vehicles", and then receive subsidies, while Japanese and Korean battery companies are not in the white list).
After the abolition of the power battery white list, the quality and cost are highly recognized by multinational car companies as Japanese and Korean battery companies, and it is a normal thing to introduce them into the supply chain of domestic joint venture brands.
This concern has not yet become a fact, an oem manufacturer power battery purchasing staff to the financial car (ID: caijingqiche) said that there are many factors to consider the purchase of power batteries, from the test pass, to the procurement of assembly cycle is very long, and the current Japanese and South Korean companies in China production capacity is very limited, there will be no large number of purchases in the short term.
From a long-term perspective, the situation that car companies are most willing to see is the internal volume of battery companies. This means that in the context of the Dominion era, car companies are willing to support new power battery suppliers, and LG New Energy is a good choice.
At present, LG New Energy's important customers include Tesla, Ford, Volkswagen, Audi, Daimler, Renault, Jaguar, Porsche and other well-known foreign car companies. In the future, the global power battery pattern may present a competitive pattern of LG new energy and Ningde era.