On the evening of August 30, Xianhui Technology released the “Announcement on Voluntary Disclosure and Signing of Major Contracts for Daily Operations”, stating that from April 7, 2022 to the present, the company and its holding subsidiary Fujian Dongheng have received a total of catl and its subsidiaries. The total amount of various contracts and fixed-point notices is about 807 million yuan.
It is worth mentioning that Xianhui Technology released a major asset purchase report (draft) in May, intending to purchase a 51% stake in Ningde Dongheng Machinery Co., Ltd. at a price of 816 million yuan in cash, a premium of about 5 times.
Looking at the details of the acquisition plan, Ningde Dongheng’s R&D investment and patent volume are significantly behind that of peer listed companies. In addition, in terms of capital, the price of this acquisition is 800 million yuan, but as of the end of 2021, the monetary capital of Xianhui Technology is only 644 million yuan, and there is another short-term loan of 127 million yuan.
What is the reason for Xianhui Technology to complete this acquisition under huge financial pressure?
It is understood that the company mainly produces precision structural parts for power batteries, and catl is its largest customer, with sales accounting for more than 92% of its revenue in 2021. From this, it is speculated that Xianhui Technology may intend to further “bind” catl, and this acquisition project is an admission ticket.
As the power battery factory enters the peak of production expansion, the prosperity of the lithium battery equipment industry is gradually recovering. It is estimated that the domestic lithium battery equipment market size will be 57.52 billion yuan in 2023. In addition, due to the relatively concentrated competition pattern of lithium battery manufacturers, leading battery companies have become the main source of orders for lithium battery equipment companies.
According to incomplete statistics, the total order value of the lithium battery equipment industry in 2021 is 14.57 billion yuan, of which CATL and its subsidiaries have issued a total of 11.43 billion orders, and calb has issued 1.968 billion orders.
Catl, which holds a large amount of capital, has an amazing speed of expansion. Judging from the current expansion plans of all battery companies, catl’s production capacity in 2025 will reach 2 times that of LG Chem, the world’s highest-capacity company.
The continuous construction of production capacity obviously requires a lot of financial support. Catl’s annual report shows that in 2021, catl will achieve operating income of about 130.356 billion yuan, and net profit attributable to shareholders of listed companies will be about 15.931 billion yuan.
Also disclosed on the same day as the annual report is the intention to expand production. The announcement announced that it plans to invest in the Xiamen Times New Energy Battery Industrial Base Project in Xiamen City, Fujian Province, with a total investment of no more than 13 billion yuan. This project alone has spent nearly a year of profits in 2021. Where does the money come from?
Obviously, for listed companies, fixed increase in financing is the main source of funds. In August 2021, catl threw out the largest fixed increase in history, with an amount of 58.2 billion yuan; in June this year, catl announced that it planned to use part of the temporarily idle raised funds, that is, not more than 23 billion yuan (including this amount) to specific funds. The object issues stocks and raises idle funds for cash management.