Source: Company Research Issued on: December 20, 2018 Author: Zou Lingling
Events: The Company issued a non-public offering of A-share stocks plan, planning to issue no more than 65 million shares of stock, with the total amount of funds to be raised not exceeding CNY 1 billion and the net proceeds used for projects related to organic fluorine chemicals and lithium battery chemicals. With such investment of less than CNY 1 billion, the Company will focus on the vertical integration layout of the industrial chain. The fund-raising project is a pre-announced investment project, which reflects the vertical integration of the Company in the industrial chain of organic fluorine chemicals and electrolytes. It includes organic fluorine chemicals upstream, lithium battery electrolyte and key materials in electrolyte upstream (additives, new lithium salts) and consists of five projects:
①Haidefu high-performance fluorine material project (Phase I), which belongs to the upstream extension of the organic fluorine chemical value chain, with a total investment of CNY 800 million, a total production capacity of 10,000 tons, a construction period of 2 years, an expected annual average income of CNY 882 million and an after-tax profit of CNY 167 million;
②Huizhou Capchem Phase III Project (carbonic ester project, with a total investment of CNY 480 million, a construction period of 1.5 years, an expected annual average income of CNY 475 million and an after-tax profit of CNY 83 million);
③Hunan Fubang new lithium salt project (Phase I, with a total investment of CNY 200 million, a total production capacity of 800 tons, a construction period of 2 years, an expected annual average income of CNY 300 million and an after-tax profit of CNY 66 million) which belongs to the upstream extension of lithium battery electrolyte industry chain;
④Poland lithium battery electrolyte, NMP and conductive pulp production line project (Phase I 20,000t electrolyte project, with a total investment of CNY 180 million, a construction period of 2 years, an expected annual income of CNY 967 million and an after-tax profit of CNY 100 million);
⑤Jingmen lithium battery material and semiconductor chemicals project (Phase I 20,000t electrolyte project, with a total investment of CNY 160 million, a construction period of 2 years, an expected annual average income of CNY 600 million and an after-tax profit of CNY 60 million). These projects will expand the capacity of lithium battery electrolytes and meet customer demands.
Improvement of fluorine chemicals integration strategy for the creation of new profit growth points. Forward-looking layout of the Company in the field of fluorine chemicals witnesses its clear strategy: 1) organic fluorine chemicals field: it has purchased Hexafluo, gaining first mover advantages in the layout of high-end fluorine-containing fine chemicals with hexafluoropropylene as the raw material and extending to Hexafluo upstream. With Haidefu as the main body (increased capital of CNY 161 million, holding 80.20% shares), it expands the medium and high-end fluorine-containing fine chemicals with tetrafluoroethylene and hexafluoropropylene as raw materials to form a complementary industrial chain. 2) inorganic fluoride chemicals field: it has invested in Yongjing Technology (increased capital of CNY 24 million, holding 25.10%) for hydrofluoric acid layout in fluorine chemical industry upstream, and established holding subsidiary Bofu Technology, acquired Zhangjiagang Hicomer Chemical, entering into the field of new lithium salt and fluorine-containing additives. In addition, the Company has announced that it plans to invest CNY 5.46 million in Winboth (fluorine-containing products development), which is beneficial to the Company's fluorine chemical sales business. Overall, the Company gradually builds an integrated layout of the fluorine chemical industry chain.
With stabilized electrolyte business development and re-deepened layout, the competitive advantages have been highlighted. The electrolyte price is on the upstream material side. On the one hand, the price of 6F is stable, and there is no much downward space for it. As the leading enterprise of electrolyte and with stable development of R&D, patent layout, customer structure and industrial chain integration, the Company has huge competitive advantages: 1) It masters core additives, extends the core value chain, and cooperates with the fluorine chemical business to create cost advantages. The Company plans to build a new lithium salt project. Currently, the pilot product has been used in some electrolyte products and has obtained certification of major customers. 2) With high-end product positioning, excellent customer structure and power battery customers covering high-end customers at home and abroad including LG, Samsung, Panasonic, Sony, BYD, CATL etc. (40% overseas customers ratio in 2017), the Company will continue to develop overseas markets. 3) The Company has a leading position in international layout. In terms of electrolyte capacity expansion: Jingmen (20,000t) project + Poland Base (Phase I 20,000t); it acquired BASF electrolyte business in the Chinese Zone and European and American markets in 2017, consolidating its international layout to better support LG, Samsung and CATL. The Company's industrial chain layout continues to deepen.