We are a major LFP cathode material manufacturer in the world and a renowned automotive specialty chemical manufacturer in mainland China. We primarily operate in the following two segments:
‧LFP cathode materials. We primarily engage in the production and sale of LFP cathode materials. LFP cathode materials are currently the most extensively used cathode materials for producing lithium-ion batteries used in a wide variety of end markets, including NEV and energy storage industries.
‧ Automotive specialty chemicals. We primarily engage in the production and sale of a diverse portfolio of automotive specialty chemical products covering diesel exhaust fluids, automobile and industrial lubricants, coolants and car maintenance products, which are widely used in the automobile manufacturing market, automotive aftermarket, and engineering equipment market.
We enjoy major market positions in the LFP cathode material industry and multiple sub-segments of the automotive specialty chemical industry. According to Frost & Sullivan, in terms of sales volume in 2023, we are China’s and the world’s fourth largest LFP cathode material manufacturer, with a global market share of 6.5%, while the three largest manufacturers held market shares of 30.5%, 12.9% and 10.5%, respectively; the third largest diesel exhaust fluid manufacturer in mainland China, with a market share of 9.1%, while the two largest manufacturers held market shares of 29.1% and 12.9%, respectively; and the third largest coolant manufacturer in mainland China, with a market share of 5.8%, while the two largest manufacturers held market shares of 12.3% and 8.8%, respectively.
The history of our Group can be traced back to 2003 when our Company was established, initially offering lubricants and engine coolants. Through strategic growth over the years, we successfully expanded and strengthened our product portfolio to also include other automotive specialty chemicals such as diesel exhaust fluids and car maintenance products. This has enabled us to form a diverse portfolio of automotive specialty chemical products for our customers. Our Company completed the initial public offering and listing of our A Shares on the Shanghai Stock Exchange in April 2017. Leveraging our long-term development strategies tailored to developments within the automotive industry, we engaged third party contract manufacturers to produce small amounts of LFP cathode materials in 2020 and the first half of 2021. This allowed us to start building knowledge and relationships in the emerging NEV supply chain. Then in June 2021, we expanded our presence in the LFP cathode material industry through the acquisitions of Tianjin Beiterui Nano and Jiangsu Beiterui Nano which are engaged in businesses in the field of LFP cathode materials. This move was driven by two key considerations. First, the automotive industry’s shift from ICE vehicles to NEVs. As a longtime supplier of automotive specialty chemicals, we felt the need to evolve with the market by entering the NEV supply chain focusing on the most extensively used lithium-ion battery cathode material. Second, we considered LFP cathode materials to be the optimal long-term technology pathway compared to cobalt-based cathodes, given LFP’s innate advantages in cost, safety and stability. We were also confident that China’s supportive policies for NEV were to significantly increase demand for LFP cathode materials. Our decision to acquire Tianjin Beiterui Nano and Jiangsu Beiterui Nano was made after careful evaluation of their technical capabilities and market dominance. Before we acquired Tianjin Beiterui Nano and Jiangsu Beiterui Nano from it, the BTR Group had over a decade of experience researching and developing LFP cathode materials, cultivating robust technology and knowledge, demonstrating stable industry leadership position.
We achieved strong growth from 2021 to 2022. Our revenue increased by 247.1% from RMB4,053.5 million for the year ended December 31, 2021 to RMB14,071.6 million for the year ended December 31, 2022. In addition, our net profit increased by 137.6% from RMB433.4 million for the year ended December 31, 2021 to RMB1,029.9 million for the year ended December 31, 2022. This was primarily attributable to the strong growth of our LFP cathode material business since we acquired it in June 2021, in terms of both sales volume and average selling prices, driven by the rapid development and growth in demand of downstream NEV and energy storage industries and the significant increase in the price of principal raw materials, such as lithium carbonate, which was attributable to tightness in upstream supply.
However, we recorded a net loss of RMB1,514.2 million for the year ended December 31, 2023 as compared to a net profit of RMB1,029.9 million for the year ended December 31, 2022. This was primarily driven by the unprecedented volatility in lithium carbonate market prices. Specifically, we recorded a gross loss of RMB57.5 million for the year ended December 31, 2023 compared to a gross profit of RMB2,433.3 million for the year ended December 31, 2022 as lithium carbonate market prices undergoing an unprecedented sharp decline in 2023 after an extended high price environment created a temporary mismatch between cost of sales of LFP cathode materials and its revenue contribution for the year ended December 31, 2023. We recorded a 44.8% year-on-year decrease in revenue from sales of LFP cathode materials in 2023, mainly attributable to a significant decrease in average selling price of LFP cathode materials which closely follows the prevailing lithium carbonate market price which experienced sharp decreases during the year. Due to the overall decline of lithium carbonate market prices through 2023, our cost of sales for LFP cathode materials stayed elevated relative to the selling prices which had to be lowered to reflect the sharp decline in lithium carbonate prices during the year. In addition, we recognized provision for impairment loss of inventories of RMB554.5 million in the 2023 as a result of the decrease in recoverable amounts of inventories attributable to the declining raw material prices.
The market challenges we faced in 2023 continued into the first half of 2024, although we saw some signs of improvement. For the six months ended June 30, 2024, we recorded a total revenue of RMB3,568.6 million, representing a decrease from RMB3,814.2 million for the same period in 2023. Our LFP cathode material segment revenue decreased from RMB2,851.5 million in the first half of 2023 to RMB2,475.6 million in the first half of 2024.
This decrease was mainly attributable to two factors affecting average selling price of our LFP cathode materials, including (i) the continued decline in lithium carbonate market prices, and (ii) an increase in sales of LFP cathode materials with procurement of lithium carbonate and raw materials from customers which result in lower revenue recognized and lower average selling price. Despite these challenges, we saw an improvement in our gross profit, recording RMB344.0 million in the first half of 2024 compared to a gross loss of RMB241.4 million in the first half of 2023. Our net loss also decreased from RMB811.5 million in the first half of 2023 to RMB260.2 million in the first half of 2024. These improvements were primarily due to the increased sales of LFP cathode materials with procurement of lithium carbonate and raw materials from customers, partially reducing the Group’s exposure to raw material price fluctuations.
We recorded revenue from sales of automotive specialty chemicals of RMB2,118.7 million, RMB1,762.8 million, RMB1,903.2 million, RMB938.1 million and RMB970.1 million in 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, respectively. The decrease in revenue from sales of automotive specialty chemicals in 2022 was primarily due to (i) the declined demand for our products as transportation and logistics in mainland China were affected during the COVID-19 pandemic, and (ii) the more intense market competition, such as bundle sales employed by our competitors as sales and marketing strategies. Revenue from sales of automotive specialty chemicals increased by 8.0% in 2023, primarily due to the increases in revenue from sales of automobile and industrial lubricant, coolants and car maintenance products as a result of resumed demand for such products following the recovery of transportation and logistics in mainland China, partially offset by a decrease in revenue from diesel exhaust fluid in light of heightened market competition.
Despite the current challenges in the LFP cathode material industry, we believe prevailing downstream prospects and growing demand are in our favor. According to Frost & Sullivan:
‧driven by the PRC government’s dual objectives of ‘‘carbon emission peak’’ (碳達 峰) and ‘‘carbon neutrality’’ (碳中和), the NEV industry experienced fast growth, resulting in significant growth in demand for NEV batteries. Specifically, shipment volume of NEV batteries in mainland China is expected to reach 1,860.5 GWh in 2028 from 816.6 GWh in 2024, representing a CAGR of 22.9%;
‧shipment volume of the ESS battery industry in mainland China is expected to reach 863.3 GWh in 2028 from 300.4 GWh in 2024, representing a CAGR of 30.2%; and
‧automobile ownership in mainland China, which closely relates to our automotive specialty chemical business, is expected to reach 430.5 million units in 2028 from 354.3 million units in 2024, representing a CAGR of 5.0%.
As a result, according to Frost & Sullivan, sales volume of LFP cathode material in mainland China is expected to further grow at a CAGR of 17.2% from 2,056.0 thousand tons in 2024 to 3,884.0 thousand tons in 2028, and the sales volumes of diesel exhaust fluids, automotive lubricants, coolants and car maintenance products in mainland China are expected to increase at CAGRs of 9.4%, 1.8%, 8.5% and 4.0%, respectively, from 2024 to 2028. Leveraging our market position, diverse product portfolio, manufacturing capabilities, research and development capabilities, product quality and quality customer base, we believe we are well positioned to seize market opportunities and benefit from the expected growth in the end markets of our products.
Source: Jiangsu Lopal Tech (02465) Prospectus (IPO Date : 2024/10/22) |