[HONG KONG] Contemporary Amperex Technology Co Limited (CATL) rose in its Hong Kong trading debut after the Chinese battery giant wrapped up the world’s biggest listing this year by raising HK$35.7 billion (S$5.9 billion) despite being blacklisted by the Pentagon and grinding through geopolitical storms.
Shares of CATL, as the largest maker of electric vehicle (EV) batteries is known, opened at HK$296 each oon Tuesday (May 20), up 13 per cent from their listing price of HK$263. Strong demand had allowed the company to price the stock at the top marketed price, and the shares rose in grey-market trading on Monday.
For investors, the allure of buying into a blue-chip stock at the forefront of EV technology outweighed the risks of getting caught up in the ongoing turbulence in Sino-US relations.
The success of the stock offering, which may increase to US$5.3 billion if CATL exercises an option to do so, single-handedly doubled Hong Kong’s proceeds from listings this year and could embolden other companies to go public.
CATL is “a true champion enabling the energy transition, a symbol of China’s success as a global green leader”, said Karine Hirn, a partner at East Capital Group. “This will be met by enormous interest.”
Priced at around 17 times current earnings multiples, CATL’s Hong Kong shares have room to rise 50 per cent, driven by strong earnings and attractive valuations, said Johnson Wan, head of China industrials research at Jefferies in Hong Kong.
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“There is only a small slice of pie left for everyone else to buy,” said Wan. “It’s a no-brainer buy.”
CATL supplies batteries to top-tier customers such as Tesla, Volkswagen, Ford Motor and Mercedes-Benz Group. It has a market share of roughly 38 per cent in electric-car batteries, comfortably ahead of its closest challenger, top EV maker BYD’s 17 per cent, according to SNE Research.
The Ningde, Fujian-based company generated sales of US$50 billion and net income of US$7 billion last year. And it plans to build on that – recently unveiling batteries that can charge 520 km of range in five minutes and up to 1,500 km on a full charge.
The funding, much of it for a US$7.6 billion overseas expansion in Europe, will be used to fuel its growth outside China, where profit margins are juicier.
Its continued growth has enriched its founders, top investors and executives, making them some of the wealthiest people in the world. Four Chinese businessmen, including chairman Robin Zeng, have amassed a combined fortune of more than US$73 billion – mainly derived from their stakes in the company – according to the Bloomberg Billionaires Index.
CATL’s rise has not come without obstacles. The company was put on a Pentagon blacklist in January based on allegations of CATL’s links to the Chinese military – something the company has denied repeatedly.
In April, a US congressional committee publicly called on JPMorgan Chase and Bank of America to stop working on the listing because of CATL’s alleged military links – again, denied by the company. But both American banks stuck with the deal.
The Chinese company’s management has said CATL expects “little impact” from the risk of US tariffs. That stands in stark contrast to a growing list of automakers from Toyota Motor to Stellantis and General Motors warning of billions in extra costs.
CATL priced its Hong Kong stock at a smaller discount to its Shenzhen-traded shares, when compared with previous second listings: Appliance maker Midea Group last year sold its stock in its US$4.6 billion Hong Kong listing at a discount of about 20 per cent, while China Tourism Group Duty Freedid so at around 27.5 per cent in 2022.
More broadly, Hong Kong shares typically trade at a 25 per cent discount to their stocks on the mainland, according to the Hang Seng Stock Connect China AH Premium Index.
“People like the fact that now you can get access to one of the best companies in China without having to go to A-shares,” said Eugene Hsiao, head of China equity strategy and China Autos at Macquarie Capital. “I think this is why they did not have to come out with massive discounts. They knew the demand was there.”
CATL will be the latest firm to go ahead with a share sale after US President Donald Trump’s broad tariff rollout. Even before the latest 90-day pause on many of the tariffs, many Chinese companies had gone ahead with their listing plans as they sought cash from investors.
CATL’s share offering will help Hong Kong’s market for listings this year surge to over US$22 billion, according to Bloomberg Intelligence. BLOOMBERG
