CATL’s $4.6B Hong Kong IPO: A Power Play in the EV Battery Market

IPO Details

Purpose of IPO: CATL aims to raise approximately $4.6 billion, potentially increasing to $5.3 billion with the greenshoe option. The funds are earmarked for global expansion, including projects in Germany, Hungary, Spain, and Indonesia, as well as R&D and production capacity enhancements.

Over-subscription: The IPO witnessed significant demand, with the public offering oversubscribed by over 25 times, and margin subscriptions reaching approximately $61.6 billion.

Dividend Commitment: CATL has a history of shareholder returns, with a dividend payout ratio of 50% in both 2023 and 2024, totaling nearly CNY 60 billion in dividends.

 IPO Placement and Outstanding Shares

• Shares Offered: Approximately 117.9 million H-shares at HK$263 each.

• Allocation: Around 7.5% to Hong Kong public investors, with the remainder to institutional investors.

• Potential Upsize: An additional 17.7 million shares may be issued if the greenshoe option is exercised.

Given the strong demand and strategic allocation, the IPO is poised for a robust debut.

Institutional and Anchor Investors

The IPO attracted over 20 cornerstone investors, including Sinopec, Kuwait Investment Authority, and Hillhouse Investment. There is no indication of any pre-listing share sales by these investors

Investment Bankers, Underwriters, and Sponsors

• Sponsors: JPMorgan, Bank of America, China International Capital Corporation (CICC), and China Securities International.

• Underwriters: A total of nine underwriters are involved, with fees significantly below industry norms, reflecting CATL’s strong negotiating position.

The involvement of prominent financial institutions underscores the IPO’s credibility and is likely to bolster investor confidence.

Company Overview

Business Model and Industry: CATL specializes in lithium-ion batteries for electric vehicles and energy storage systems. With a 38% global market share in 2024, it leads the EV battery sector.

• 2024 Revenue: RMB 362.01 billion (a 9.7% decrease YoY).

• 2024 Net Income: RMB 50.75 billion (a 15.01% increase YoY).

Market Position: CATL is a key supplier to major automakers like Tesla, BMW, and Toyota, reinforcing its dominant market position

Management Team: Led by Chairman Zeng Yuqun, the team has been instrumental in CATL’s global expansion and technological advancements

Market and Economic Factors

Sector Trends: The EV market is projected to reach 45 million units by 2030, necessitating a tripling of battery capacity.

Timing of IPO: The IPO coincides with a temporary US-China trade truce, providing a favorable backdrop for international investor participation.

Economic Environment: Despite global economic uncertainties, the clean energy sector continues to attract significant investment, benefiting companies like CATL.

📊 Peer Comparison: CATL vs. Major EV Battery Manufacturers

Note: Some financial metrics for CATL and SK Innovation are not publicly disclosed or are unavailable.

🔍 Key Insights

• Market Leadership: CATL maintains a dominant position with a 38% share of the global EV battery market in 2024, significantly ahead of competitors like BYD (17.2%) and Samsung SDI (8%).

• Financial Performance:

  • BYD: Achieved a 29% revenue growth in 2024, with a net margin of 5.2% and a return on equity (ROE) of 6.09%.

  • Samsung SDI: Experienced a revenue decline of 22.6% in 2024, with a net margin of 3.6%.

  • SK Innovation: Reported a 12.15% revenue growth in 2024 but faced a negative net margin of 3.0%.

• Valuation Metrics:

  • BYD: P/E ratio of 25.3x and P/B ratio of 5.07x, indicating strong investor confidence.

  • Samsung SDI: High P/E ratio of 289.7x, which may suggest overvaluation or expectations of significant future growth.

• Debt Management:

  • BYD: Maintains a debt-to-equity ratio of 18.43%, reflecting prudent financial management.

  • Data for CATL, Samsung SDI, and SK Innovation: Specific debt-to-equity ratios are not publicly disclosed or are unavailable

CATL’s substantial market share and strategic initiatives position it favorably within the EV battery industry. While specific financial metrics for CATL are limited in the available data, its leadership and investment strategies underscore its potential for sustained growth.

Note: Specific financial metrics for peers are not provided in the available data.

BOCOM International maintains a “Buy” rating for CATL, with a target price of RMB 314.11, citing its leading battery technology and global expansion strategy.

The IPO’s public offering was oversubscribed by over 25 times, indicating strong investor interest and suggesting a positive performance on the first day of trading.

Given CATL’s market leadership, robust financial health, and the strong demand for its IPO, it is recommended to subscribe to the IPO. The stock is expected to trade strongly above the IPO price of HK$263 on its debut

The IPO prospectus can be downloaded from the HKEX website:Hong Kong Exchanges and Clearing+1Hong Kong Exchanges and Clearing+1

• CATL Prospectus PDF

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