Highpower IPO: Lithium battery misses the electric wave in 20 years

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Another battery company formally applied for IPO. A few days ago, Highpower Technology disclosed its initial public offering prospectus. It plans to publicly issue 20 million shares and raise funds of 1.5 billion yuan for the construction of the Guangdong Highpower New Energy R&D and Production Base Project (Phase I) and the New Energy R&D Center project.


Highpower Technology was established in 2002 and has been engaged in the R&D, production and sales of lithium batteries and nickel-metal hydride batteries for consumer electronic products such as notebook computers, mobile phones, and smart wearables.


However, unlike the already larger companies like Xinwangda (30.930, -1.53, -4.71%) and Yiwei Lithium (102.870, -1.98, -1.89%), Highpower Technology, which has been established for nearly 20 years, has never been The transformation is in the field of power lithium battery during the high-speed growth period. In the 3C consumer lithium battery field that has already entered a mature period, whether Highpower Technology still has enough room for development and attractiveness is the issue that investors are most concerned about.


Ni-MH battery market shrinks, small lithium batteries are oversupply


Highpower Technology’s main business is the R&D, design, manufacturing and sales of lithium-ion batteries and nickel-metal hydride batteries. Its existing products include polymer soft-pack lithium-ion batteries, cylindrical lithium-ion batteries and nickel-metal hydride batteries. Among them, lithium-ion batteries are mainly used in notebook computers, smart phones, wearable devices, smart homes, electric two-wheeled vehicles and other products; nickel-hydrogen batteries are mainly used in civilian retail, lighting and other fields.


However, the future development prospects of Highpower's small lithium-ion batteries and nickel-hydrogen batteries, two pillar products, seem to be quite worrying.


Consumer electronics are the main application areas of small lithium-ion batteries (single battery capacity less than 6000mAh). According to research data provided by Techno Systems Research, the demand for small lithium-ion batteries (excluding automotive power applications) in 2020 is expected to be 6.62 billion, but shipments in 2020 will reach 9.28 billion, of which 2.99 billion will be shipped from South Korea. The volume of goods ranked first, followed by China's shipments with 2.4 billion. Shipments are as much as 40% higher than the market demand in the same period, which is in a state of significant oversupply.


In addition, according to the forecast of Techno Systems Research, from 2020 to 2025, the compound growth rate of small lithium batteries is expected to reach 9.5%, and the demand for 2025 will reach 8.81 billion units, but this number is still lower than the global shipments in 2020. . The oversupply of small lithium batteries is still difficult to change in the next few years.


Ni-MH battery is another important product and source of income of Highpower Technology. However, the global small nickel-hydrogen battery industry has already entered a mature period.


Japan's Fuji economic data shows that the global production scale of small nickel-hydrogen batteries in 2019 was 1.02 billion, and the global production scale is expected to be 950 million in 2024, which will shrink by about 7% compared to 2019.


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The future prospects of important pillar products are of course worrying, but the delay in transforming the power lithium battery may be a greater strategic error of Highpower Technology. This can be clearly seen from the comparison of the current rapid development of peer companies.


Similar to Highpower Technology, Xinwangda, founded in 1997, started as a packaging for consumer batteries. In 2008, Xinwangda keenly caught the development opportunity of power lithium battery, began to transform and upgrade, and formally expanded the new energy vehicle power battery business.


Relying on the relatively successful transformation of the power battery business, Xinwangda has grown in market value from several billion to nearly 50 billion in the ten years of its listing, achieving leapfrog development.


The same is true for Yiwei Lithium, which has a similar establishment time as Highpower Technology. Founded in 2001, Yiwei Lithium Energy is also a leading company in the consumption of lithium batteries. Although the company has always maintained a cautious attitude towards the power battery business and only achieved profitability in 2019, the continuous and steady investment in power lithium batteries for many years is also a key factor that has contributed to the current 200 billion market value of Yiwei Lithium.


Highpower Technology, which has done little in the field of new energy vehicle power batteries, has escaped some risks that may be encountered in the transformation and development, but it has completely missed this once-in-a-lifetime historical growth opportunity.


The proportion of administrative expenses has doubled, and the fee rate is nearly double that of peers


High management cost is a problem that Highpower Technology has been facing for many years.


The prospectus shows that from 2018 to 2020, Highpower Technology’s management expenses will be 127 million yuan, 143 million yuan, and 216 million yuan, respectively, accounting for 6.62%, 6.89%, and 8.24% of the company’s revenue in the same period, obviously. Shows a trend of increasing year by year.


A horizontal comparison with peer companies can also clearly show that Highpower Technology has significantly higher management costs.


Comparison of Management Fee Rate between Highpower Technology and its peers Comparison of Management Fee Rate between Highpower Technology and its peers

From 2018 to 2020, the average management expense ratio (management expense/operating income) of several peer companies such as Xinwangda, Penghui Energy (22.340, -0.44, -1.93%), Yiwei Lithium Energy, and Zhuhai Guanyu They were 3.57%, 4.25%, and 4.26%, which were significantly lower than Highpower's management expense ratio during the same period. When the gap between Highpower's management expense ratio and the average of several peer companies is the largest, it has nearly doubled.


The company explained that continuous investment in talent introduction, employee incentives, and company management system construction, high management and administrative staff salary and consulting service fees, relative dispersion of plant divisions, and economies of scale are factors such as significantly higher management expense ratios. main reason.


In addition to excessive management costs, financial costs will also change in 2020.


In 2018 and 2019, Highpower's financial expenses were only RMB 2,320,500 and RMB 4,731,400, which increased sharply to RMB 63,675,400 in 2020.


The foreign sales revenue accounted for a relatively high proportion, and the resulting large exchange gains and losses were the main factors for the company's sudden increase in financial expenses in 2020.


In order to reduce the risk of exchange rate fluctuations, Highpower Technology locks foreign exchange by purchasing forward foreign exchange contracts. After risk hedging, in 2020, the company's exchange gains and losses caused by exchange rate fluctuations, gains from changes in the fair value of forward foreign exchange contracts, and investment income from the settlement of forward foreign exchange contracts total 48.87 million yuan, but it still fails to cover 52.96 million yuan in the same period. Exchange losses.

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