Clearance and Re-injection: Hillhouse Capital and Zhang Lei's New Energy Investment Landscape

With the heat of the new energy track, Zhang Lei and his Hillhouse Capital have repeatedly become the focus of people's attention.

Huaxia Energy Network (www.hxny.com) learned that on June 28, Zhang Lei, founder of Hillhouse Capital, revealed in a speech at the second Sina Finance ESG Global Leaders Summit: A few days ago, Hillhouse's first RMB carbon neutral industry investment fund completed its first shutdown, with a total scale of more than 4 billion yuan, focusing on mining high-quality enterprises in new energy and other directions.

Correspondingly, on June 19, hillhouse capital, as a strategic investor, invested in GCL Integration (SZ:002506), a well-known company in the photovoltaic field; On June 22, in the fixed increase of the power battery leader Ningde Times (SZ: 300750), it became one of the 22 subscribers, and was allocated 7.32 million shares, with an amount of nearly 3 billion. In the new energy track, Hillhouse Capital is still rapidly deploying, which is in strong contrast to various rumors that it is in crisis.

As the representative of the top private equity fund in China, Hillhouse Capital, which is known as "asia's largest private equity institution", has a large following. Every time it buys stocks, it will soon have funds to keep up, so that the so-called "hillhouse effect" has been formed. Whether it is a traditional field, or the Internet, or an innovative medical track, it was once a hunting ground for Hillhouse Capital to make a lot of profits.

Nowadays, in the new energy track, Hillhouse Capital is also constantly expanding its territory, and large shares of well-known companies such as BYD (SZ:002594), CATL Times, LONGi Green Energy (SH:601012), and Tongwei (SH:600438) have been pocketed by it. Moreover, this list is still growing.

Zhang Lei often said: "Weak water three thousand, only take one scoop." "While expanding the new energy territory, there are also some companies that have been liquidated by it. Behind the expansion and clearance, what kind of underlying logic does Zhang Lei have when investing in new energy?

Buy half of the new energy

New energy has always been a key focus area for Hillhouse Capital, and an earlier investment can be traced back to the Internet car brand Weilai Automobile.

In June 2015, Hillhouse Capital participated in the first round of financing of NIO, leading an investment of US$100 million; Subsequently, in the multiple rounds of financing of Weilai Automobile, there are the figures of Hillhouse Capital; In September 2018, NIO was listed on the NASDAQ, becoming the first electric vehicle company in China to be listed in the United States. At this time, Hillhouse Capital's shareholding ratio reached 7.5%, and it was the third largest shareholder of WEILAI Automobile.

At the same time, Hillhouse Capital also bought Tesla stock sharply.

Entering 2020, Hillhouse Capital began to bet heavily on the field of new energy, and large-scale investments were overwhelming.

In July, CATL completed a fixed increase of 19.7 billion yuan, Hillhouse Capital subscribed 10 billion yuan, and its private equity fund Zhuhai Hillhouse Suicheng subscribed for 600 million yuan, with a total of more than half of the shares. After the landing of the fixed increase, Hillhouse Capital's shareholding ratio reached 2.27%, becoming the ninth largest shareholder in the Ningde era.

In the same month, Xiaopeng Automobile announced the completion of the C+ round of financing, with a financing amount of nearly 500 million US dollars, and Hillhouse Capital participated.

In the same month, Ideal Auto was listed on the NASDAQ, offering 95 million ADS shares to the public, raising $983 million. According to the prospectus, Hillhouse Capital subscribed for 33.33 million of them, totaling US$300 million, accounting for 35.1% of the public offering shares in the IPO.

In September, Two private equity funds under Hillhouse Capital, Tianjin Liren and Zhuhai Hecheng, jointly invested 1.5 billion yuan to purchase 20.83 million shares of Enjie Shares (SZ:002812). The investment in Enjie shares shows that Hillhouse Capital's investment in the field of new energy extends from batteries and vehicles to the depths of the industrial chain.

In the same month, Hillhouse Capital subscribed for an additional 230 million shares issued by Hong Kong stock Xinyi Solar (HK:00968) with a capital contribution of HK$580 million.

In December, Tongwei Co., Ltd. (SH:600438), the global leader in silicon materials, announced the results of a placement of nearly 6 billion fixed increase orders, and Hillhouse Capital's China Value Fund subscribed for about 500 million yuan.

In the same month, LONGi Green Energy issued an announcement that Hillhouse Capital acquired 226 million shares of LONGi Green Energy held by li Chun'an, a shareholder of the company, at a price of 70 yuan per share, accounting for 6% of the company's total share capital, with a total price of 15.84 billion yuan. After the completion of the transaction, Hillhouse Capital became the second largest shareholder of LONGi Green Energy.

This series of investment actions shows that Hillhouse Capital's layout in the field of new energy has expanded from new energy vehicles and new energy cells to the field of photovoltaic new energy.

In February 2021, Tianjin Liren took a stake in Sunshine Power (SZ:300274), holding 9 million shares, accounting for 0.62% of the total share capital, ranking the ninth largest circulating shareholder. In the same month, Hillhouse Capital again spent $200 million to subscribe for BYD's latest round of private placements.

Hillhouse Capital's intensive shots make people feel that Zhang Lei has great ambitions to buy half of China's new energy. Moreover, this betting is far from stopping.

Huaxia Energy Network (www.hxny.com) noted that starting from the second half of 2021, Hillhouse Capital's investment team has intensively investigated a series of companies in the field of new energy, including Tianci Materials (SZ:002709), Polyfluoride (SZ:002407), Ronbay Technology (SH:688005), Fu Neng Technology (SH:688567), Grimme (SZ:002340), Magmite (SZ:002851), Huichuan Technology (SZ:300124), Huagong Technology (SZ:000988), Sanhua Intelligent Control (SZ:002050) and so on. In June this year, the high-profile capital increase of GCL Integration and the fixed increase of ningde era.

Moreover, it is reported that Hillhouse Capital also investigated the company Kemet (SZ: 002549). According to Kemet Gas, the company has a production capacity of hydrogen products. Some industry insiders have analyzed that Hillhouse Capital may lay out the hydrogen energy field in the next step, which is a new important signal.

Place a heavy bet, make up a shot, and don't be afraid of high

Hillhouse Capital's "high-profile" layout of new energy is closely related to the "carbon neutrality" trend at the macro level, but in the choice of enterprises, Hillhouse Capital has its own investment logic. Although Hillhouse Capital has been weakening individual heroism, behind these investment logics, it is still full of the figure of its soul figure Zhang Lei.

Heavy warehouse head company is one of Hillhouse Capital's usual tactics.

Zhang Lei believes that the "first principle" of the investment system is to identify the essential attributes of business in a changing environment, allocate good capital and good resources to the most capable enterprises, and help society create long-term value. Like investing in innovative drugs and Internet ideas, in the field of new energy, Zhang Lei also particularly likes the industry leaders in the subdivision field.

At present, Hillhouse Capital's layout in the field of new energy is mainly concentrated in the three major tracks of new energy batteries, new energy vehicles and photovoltaic new energy.

In the field of new energy batteries, as the world's leading power battery system provider, CATL has a layout in the upstream and downstream of the lithium battery industry chain, with obvious advantages; Enjie co., Ltd. is the leader of the wet separator industry and the largest power lithium battery separator manufacturer in China.

In the field of new energy vehicles, Weilai, Xiaopeng and Ideal are known as the "three giants" of China's new electric vehicle forces; BYD is not only in China, but also in the field of new energy vehicles in the world.

In the field of photovoltaics, Xinyi Solar is the world's largest manufacturer of solar photovoltaic glass; Tongwei co., Ltd. is the domestic photovoltaic polysilicon and cell leader; LONGi Green Energy is the general leader of the global photovoltaic industry chain, with obvious scale, cost and technical advantages in the industry.

In addition to the heavy warehouse head company, Zhang Lei's other investment logic is to place heavy bets when he sees it accurately, and if he misses it in the early stage, he will find an opportunity to resolutely get on the car in the later stage. This is called "make-up shot" within Hillhouse Capital. As Zhang Lei said: Flowing water does not compete for the first, but the struggle is endless.

This investment logic applies to projects that are particularly optimistic but missed in the early stages. This is the case with Hillhouse Capital's stake in LONGi Green Energy through a transfer.

On December 18, 2020, the Central Economic Conference officially listed "carbon peaking and carbon neutrality" as one of the eight major work priorities in 2021, and Hillhouse Capital, which has a keen sense of smell in the market, certainly understands the opportunities behind this. At this time, LONGi Green Energy has become the first stock in China's photovoltaic industry and the world's highest market value photovoltaic company.

Such a rare opportunity, such an excellent enterprise, Hillhouse Capital naturally does not want to miss. On December 19, Hillhouse Capital signed the Share Transfer Agreement with Li Chun'an, the second largest shareholder of LONGi Green Energy, and the decisiveness of the move is extremely rare in the industry. It is worth noting that the transaction price of the two parties was 70 yuan per share, which was at the high level of LONGi Green Energy's stock price at that time.

Dare to increase the position at a high level is the consistent style of Hillhouse Capital, and it is also another important investment logic of Zhang Lei.

In September 2020, Hillhouse Capital invested in Enjie Shares, a lithium battery diaphragm leader, out of this investment logic. At that time, the share price of Enjie shares had just reached a record high and was still rising. Hillhouse Capital decisively made a move at a high price of 72 yuan / share, buying 20.83 million shares.

Some insiders have analyzed that the reason why Hillhouse Capital dares to increase its position at a high level is because of the existence of the "Hillhouse effect". Sure enough, after only one quarter, the stock price of Enjie shares has risen to 165.45 yuan / share, up 129.79% from the issue price, and the total floating profit of the two private placements under Hillhouse is as high as 1.947 billion yuan.

Should I copy Hillhouse's homework?

Zhang Lei has a most basic investment philosophy: long-term holding, be a friend of time. All of Hillhouse Capital's investments can be interpreted as an extension of Zhang Lei's investment philosophy.

Zhang Lei has said more than once: I want to be an ultra-long-term partner of the enterprise, which is my belief. Hillhouse's mission is to identify companies with the most long-term competitive advantages and use the longest line of money to help companies achieve long-term value. In his book "Value", Zhang Lei also wrote: On the road of long-termism, walk with the great pattern viewer and be a friend of time.

"Long-term holding, time friends", which is respected by some followers, and even a large number of "copying homework" people.

In his investment in new energy companies, Zhang Lei seems to have done this, even since his first investment in the field of new energy.

Zhang Lei invested in WEILAI Automobile, it is said that first of all, he was optimistic about its founder Li Bin, and through only one skiing activity, Zhang Lei decided to invest in Li Bin and invest in Weilai Automobile. He said: "The whole entrepreneurial team led by Li Bin is very idealistic, they want to change the world, and no matter what they do, I am willing to support this group of people." ”

Since then, Zhang Lei has indeed done this. As one of the first six founding investors of NIO, Hillhouse Capital not only supported the establishment of NIO, but also assisted it in formulating domestic and foreign market development strategies, and used its various resources at home and abroad to help NIO build an overseas team.

Huaxia Energy Network (www.hxny.com) noted that from the C round to the C+ round, and then to the listing, Hillhouse Capital has followed the investment all the way and has never been absent. However, after the listing, Weilai Automobile's stock price is not strong and has been fluctuating up and down the issue price, but this does not affect Hillhouse Capital's optimism about it. In January 2019, NIO issued a total of US$650 million of convertible senior bonds, of which Hillhouse Capital subscribed to US$30 million; a few months later, it increased its holdings by 20.62 million shares.

Hillhouse Capital's investment has not boosted NIO's stock price. And since its inception, Weilai Automobile has not been able to achieve profits, and even a huge loss, the continuous downturn in the stock price has made Hillhouse Capital once have a huge floating loss.

With dismal performance and falling stock prices, Hillhouse Capital seems to see no hope in Weilai Automobile. By the third quarter of 2019, when Weilai Automobile's stock price fell to $1.19 per share, Hillhouse Capital could no longer sit still and began to reduce its shares. By Valentine's Day in 2020, Hillhouse Capital completely liquidated all the shares of NIO.

Liquidating Weilai Automobile made Hillhouse Capital suffer heavy losses and missed the magnificent rally shortly thereafter. This also makes Zhang Lei's declared investment philosophy of "long-termism and time friends" faceted.

In addition to Weilai Automobile, the other two major electric vehicle new forces Xiaopeng Automobile and Ideal Automobile have also suffered the same fate, and in other fields, similar phenomena are not uncommon.

Capital is profit-seeking, and there is nothing wrong with liquidating or increasing holdings in order to benefit, and Hillhouse Capital is no exception. What people criticize is that between saying one set and doing one set, it is easy to let a large number of retail investors who "copy homework" accidentally become "takeovers". After buying half of China's new energy, the next clearance is not far away.

Regarding long-termism, Zhang Lei explained: All investment, you are first optimistic about this industry, then love a founder, and finally continue to invest, which is called long-termism, and it is also the core of value investment. At the same time, he also said: capital can leave the company, but it cannot leave the valuable track.

This may explain the reason why Hillhouse Capital liquidated Weilai Automobile and then repositioned BYD. In the future, Zhang Lei and Hillhouse Capital may liquidate some enterprises and invest in some enterprises, but at least for a period of time, they will not give up the new energy track. This may be the only place where retail investors who "copy" new energy stocks can still comfort themselves.

(Reprint please indicate the source, article source: Huaxia Energy Network, WeChat: hxny3060)