The Shenzhen Stock Exchange announced on May 17 that the sponsor withdrew the issuance and listing application documents due to Xianghe Kunlun New Energy Materials Co., Ltd. (hereinafter referred to as "Kunlun New Materials"). In accordance with Article 62 of the Rules for the Review of Stock Issuance and Listing on the Shenzhen Stock Exchange (Revised in 2024), the Shenzhen Stock Exchange has decided to terminate the review of its issuance and listing.
01
Revenue has skyrocketed 10 times in two years
According to the prospectus, Kunlun New Materials was established in 2004 and is one of the earliest scientific and technological enterprises engaged in the professional development and production of power lithium-ion battery electrolytes in China.
The company has established long-term and stable cooperative relations with enterprises including CATL, LG, SK, EVE Lithium Energy, Penghui, Ganfeng Lithium Battery, Haisida, Wanxiang A123, Lishen Battery, Micromacro Power and other enterprises, and has become a domestic electrolyte R&D, production, sales and service enterprise with strong growth strength.
Benefiting from the rapid growth of downstream demand for new energy vehicles and power batteries, in 2021, the unit price of electrolyte will also rise sharply due to the shortage of lithium hexafluorophosphate, the main raw material. The unit price of Kunlun New Material's electrolyte increased from 31,900 yuan/ton in 2020 to 71,800 yuan/ton in 2021, and its performance began to skyrocket.
According to the prospectus, the issuer's operating income in 2020 was only 192 million yuan, which increased to 1.184 billion yuan in 2021, an increase of nearly 5 times, and further increased to 2.114 billion yuan in 2022, an increase of nearly double, with a compound growth rate of 231.96% in the past three years.
Such a high performance growth is first of all the sales revenue of CATL, the largest customer, reaching a record high.
During the reporting period, the company's revenue to the top five customers accounted for 55.33%, 73.22%, 86.18% and 82.07% respectively, of which the sales revenue to the largest customer CATL accounted for 28.22%, 45.97%, 58.59% and 53.81% respectively.
However, with the slowdown in industry demand and the ramp-up of electrolyte and upstream raw material production capacity, the price of lithium hexafluorophosphate and electrolyte began to plummet all the way, and the dilemma of increasing income but not increasing profits also appeared in Kunlun New Materials.
In 2022 and the first half of 2023, the unit price of electrolyte of Kunlun New Materials will be 58,900 yuan/ton and 34,600 yuan/ton respectively, showing a continuous downward trend. This also led to a year-on-year decline of 21.46% and 45.33% in the company's operating income and net profit in the first half of 2023, respectively.
The company said that if the future downstream battery demand growth is not as expected or the capacity expansion rate of the battery industry is not as fast as the expansion rate of electrolyte production capacity, it will squeeze the profit margin of electrolyte products and reduce the gross profit margin level of products, thereby affecting the profitability of the company's main business.
However, in this context, Kunlun New Materials will continue to spend money to expand production capacity.
02
Overcapacity is still quadrupling capacity
In this IPO, Kunlun New Materials plans to raise 1 billion yuan for an annual output of 240,000 tons of lithium-ion battery electrolyte project, with a total investment of 1.693 billion yuan.
At that time, the company's electrolyte production capacity will increase from the current 60,000 tons/year to 300,000 tons/year, but the company's capacity utilization rate in the first half of 2023 has decreased significantly.
From 2020 to 2022, and in the first half of 2023, the production capacity of Kunlun New Materials will be 20,200 tons/year, 20,200 tons/year, 40,000 tons/year and 30,000 tons/year, respectively. During the same period, the company's capacity utilization rate was 30.47%, 79.21%, 91.65% and 72.33%, respectively, and the capacity utilization rate fluctuated greatly.
In fact, at present, as the price of lithium hexafluorophosphate has fallen to the bottom, for new entrants who do not have cost advantages and backward production capacity manufacturers, the momentum of production suspension and clearance is becoming more and more obvious.
In contrast, leading enterprises have taken the initiative to gradually slow down the investment and construction of new production capacity by virtue of supply chain costs and the advantages of large customers, so as to support product prices and ensure their own profitability while ensuring competitive advantages.
In April 2024, Capchem, a leading company in the industry, announced the postponement of its fundraising project "Jingmen Capchem 283,000 tons per year lithium battery materials project", and the construction of the second phase of 103,000 tons of lithium battery electrolyte capacity has been extended from December 31, 2024 to December 31, 2026.
In September 2023, Shenghua New Materials cancelled the two electrolyte fundraising projects of "300,000 tons of electrolyte project (Dongying)" and "200,000 tons of electrolyte project (Wuhan)" in the additional issuance plan.
In June 2023, Duofluoride announced that the "key materials project with an annual output of 100,000 tons of lithium-ion battery electrolyte", which originally planned to raise 4.4 billion yuan, was reduced to only 1.5 billion yuan.
On March 9, 2024, Tianci Materials announced that it plans to start the shutdown and maintenance of the production line with an annual output of 30,000 tons of liquid lithium hexafluorophosphate on March 11, 2024, and the maintenance time is expected to be no more than 30 days.
In the context of the above-mentioned overcapacity and falling prices in the electrolyte market, compared with the head enterprises, Kunlun New Materials, which does not have the advantage of integrated layout, still expands its production capacity by 4 times, which is naturally questionable.
In the first round of inquiry, the Shenzhen Stock Exchange also raised an inquiry on the capacity utilization rate of Kunlun New Materials, requiring Kunlun New Materials to explain whether there is overcapacity in the electrolyte market and whether there is a risk of insufficient capacity utilization after the fund-raising project is put into operation in combination with the large increase in the production capacity of the fund-raising project and the existing production capacity of the mainland electrolyte industry.
In response to the inquiry letter, Kunlun New Materials mentioned that the design capacity in 2025 will be set at 180,000 tons, that is, the existing production capacity of 60,000 tons and the production capacity of Yibin Kunlun Phase I of 120,000 tons. Kunlun New Materials also said that there is some uncertainty about the release of the remaining 120,000 tons of production capacity of the fund-raising project in 2025.
03
R&D expense ratio is only 1.29%
On May 8 this year, the official website of the Ministry of Industry and Information Technology issued the "Lithium Battery Industry Standard Conditions (2024 Edition)" and "Lithium Battery Industry Standard Announcement Management Measures (2024 Edition)" (draft for comments).
Among them, the draft of the new version of the specification conditions shows that the annual expenses for R&D and process improvement of lithium battery industry chain enterprises shall not be less than 3% of the main business income, and the actual output of the previous year shall not be less than 50% of the actual production capacity of the same year at the time of declaration.
The Ministry of Industry and Information Technology revised the industry standard conditions, which is intended to guide enterprises to reduce manufacturing projects that simply expand production capacity and strengthen technological innovation.
According to the prospectus, Kunlun New Materials and other companies have made significant progress in super-rechargeable batteries, solid-state batteries and new electrolyte technologies. In terms of overcharging technology, the 4.45V and 4.5V high-voltage electrolytes developed by Kunlun New Materials provide strong support for improving the charging efficiency of batteries.
At the same time, the company has also achieved mass production and supply in the field of sodium-ion battery electrolyte, and has established cooperative relations with many well-known enterprises.
Kunlun New Materials has achieved significant growth in shipments and operating income in the field of semi-solid-state battery electrolyte. In 2023, the company's semi-solid-state battery electrolyte shipments increased by 78.50% year-on-year.
Kunlun has also made important progress in the research and development of solid-state electrolyte materials. The conductivity of sulfide electrolytes and oxide solid electrolytes has reached the industry-leading level, and samples have been sent to several battery manufacturers for testing.
However, from the perspective of R&D expense rate, Kunlun New Material's R&D expense rate only reached the requirement of 3% in 2020. In 2021, 2022 and 2023, the R&D expense ratio will be only 1.03%, 0.67% and 1.29%, respectively. Compared with the R&D expense ratio of 4.63% of comparable companies, it is also significantly behind.
It can be seen that the R&D expense rate of Kunlun New Materials is far from meeting the requirements of 3% of the new version of the specification conditions draft. In the context of overcapacity industry, it is doubtful whether the product competitiveness of Kunlun New Materials can continue.
From the perspective of the new cycle, the key to the growth of electrolyte companies through the cycle is to reduce costs through integrated layout and bind head customers to increase market share, and cost advantages will help leading enterprises to further expand their market share.