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The power battery unicorn "Zhengli New Energy" went to Hong Kong for IPO, and FAW Hongqi and GAC Trumpchi were customers

The power battery unicorn "Zhengli New Energy" went to Hong Kong for IPO, and FAW Hongqi and GAC Trumpchi were customers

The Hong Kong Stock Exchange disclosed on July 26 that Jiangsu Zhengli New Energy Battery Technology Co., Ltd. submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CICC and CMB International as joint sponsors.

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The power battery unicorn "Zhengli New Energy" went to Hong Kong for IPO, and FAW Hongqi and GAC Trumpchi were customers

Zhengli New Energy is a dark horse in the field of new energy. At the 2024 China Unicorn Enterprise Report Conference on June 16, the conference released the "China Unicorn Enterprise Research Report 2024", revealing the latest pattern of China's unicorn enterprise development, the report shows that there will be 375 Chinese unicorn companies in 2023, with a total valuation of about 1.2 trillion US dollars.

As a key enterprise in the field of power batteries and energy storage batteries, Zhengli New Energy was once again selected into the list of China's "unicorn" enterprises, which is the second consecutive year that the company has won this honor since it was newly selected into the list of China's "unicorn" enterprises last year.

Zhengli New Energy is a leading manufacturer of power and energy storage batteries in China, developing a multi-technology path battery product portfolio driven by market demand and technology. The company provides integrated solutions for battery cells, modules, battery packs, battery clusters, and battery management systems, and is committed to expanding the large-scale application of electrochemical products in the full scenario of land, sea and air interconnection ("LISA").

Zhengli New Energy is one of the very few companies in China's top 10 power battery companies with auto parts genes (according to the Frost & Sullivan report, in terms of installed capacity in 2023).

Thanks to the core management's deep cultivation in the auto parts industry and deep insight into the automotive industry, the company has built a "5-3-1" R&D strategy system based on the integrated product development ("IPD") process around the comprehensive and optimal needs of OEM customers for product safety, quality, performance and cost, created a vehicle power battery product matrix of core business under multi-technology paths, and forward-looking research and development of aviation batteries, so as to occupy a leading position in multiple scenarios and rapid technology iteration in the battery industry.

According to the Frost & Sullivan report, in China, in 2023, the company will rank 10th in the power battery market, 7th in the lithium iron phosphate power battery market, and 8th in the ternary power battery market in terms of installed power battery capacity.

From 2022 to 2023, according to the year-on-year growth rate of installed capacity in 2023, the company ranked 2nd among the top 10 enterprises in the power battery market in terms of installed capacity, and ranked 1st among the top 10 enterprises in the lithium iron phosphate power battery market.

For the three months ended March 31, 2023 to March 31, 2024, the company ranked 2nd among the top 10 enterprises in the power battery market in terms of installed capacity in the three months ended March 31, 2024, 1st among the top 10 enterprises in the lithium iron phosphate power battery market in terms of installed capacity, and 2nd among the top 10 enterprises in the ternary power battery market in terms of installed capacity.

According to the Frost & Sullivan report, the power battery market has grown steadily in recent years, and the global installed capacity of power batteries is expected to increase from 716.0GWh in 2023 to 3,513.1GWh in 2028 at a CAGR of 37.5%. China's installed power battery capacity is expected to grow at a CAGR of 37.9% from 389.0GWh in 2023 to 1,943.3GWh in 2028.

China's power battery industry is at an inflection point in its development, posing unique opportunities and challenges to industry participants.

The automotive industry has always paid attention to the comprehensive optimization of product safety, quality, performance and cost, which has promoted the structural changes of the new energy vehicle and battery industry, and the development trend of multi-path has become more and more significant. In the context of the decline of battery subsidies and the technological breakthrough of lithium iron phosphate batteries, the market dominated by ternary batteries has quickly switched to lithium iron phosphate batteries. According to the Frost & Sullivan report, in China, ternary batteries accounted for 65.0% in 2019 and 67.1% in 2023.

The model mix of the new energy vehicle market has also changed significantly. As BEVs have gained the largest market share, PHEVs have achieved rapid growth due to their lower cost and range advantages.

According to Frost & Sullivan, the market penetration rate of BEV vehicles in China in 2023 is 22.2% in terms of sales volume, and sales are expected to grow at a CAGR of 12.1% from 2023 to 2028. The total market share of China's PHEV (including EREV) market is 9.3% in 2023, and sales are expected to grow at a CAGR of 38.6% from 2023 to 2028.

The rapidly changing market environment requires battery manufacturers to provide diversified product solutions, which poses new challenges to the flexibility and development capabilities of battery suppliers. In order to meet the stable supply demand for battery products in the early stage of industry development, many power battery companies have invested a lot of resources to build special production lines for BEV large-capacity batteries and ternary batteries.

Ternary production lines used to produce PHEV small-capacity cells or lithium iron phosphate cells can lead to high retrofit and manufacturing costs. At the same time, due to the core demand of cost control, OEMs have put forward higher requirements for standardized battery products that can be adapted to different types of vehicles and compatible with different electrochemical systems.

Therefore, power battery manufacturers are guided by market demand and create high-quality, low-cost multi-technology path products through the layout of high-efficiency and flexible production lines, so as to succeed in today's market.

Zhengli Xinneng's business strategy has helped the company win the recognition of many well-known domestic and foreign OEMs, establish long-term cooperative relations, and become an excellent supplier of large central state-owned enterprises, new car-making forces and multinational leading vehicle enterprises. Relying on the company's technology and product advantages, the company's battery product supply share of the core models of many leading global leading enterprises such as FAW Hongqi, GAC Trumpchi, Leapmotor, SAIC-GM-Wuling, and SAIC-GM has continued to increase.

As of March 31, 2024, the company's sales penetration rate of Leapmotor's core BEV models and SAIC-GM's core PHEV product GL8 Luzun PHEV reached more than 50%. In addition, the company also cooperates with Deye Co., Ltd. and other enterprises around energy storage batteries, and actively seeks cooperation with customers in the aviation and shipbuilding fields to promote the mass production of products.

Zhengli New Energy has built a battery product portfolio covering all scenarios and multiple paths of land, sea and air interconnection. The company's automotive power battery products are mainly lithium iron phosphate battery products and ternary lithium battery products. The company's automotive power batteries can cover BEV, PHEV, EREV, HEV and other multi-power types of automotive batteries, taking into account the needs of multi-purpose vehicles such as cars, SUVs and MPVs. The company's energy storage and marine power battery products are mainly lithium iron phosphate battery products, and aviation battery products are mainly high-nickel semi-solid-state lithium battery products.

As of March 31, 2024, the R&D team of Zhengli New Energy has more than 900 full-time employees, of which about 25% have a master's degree or above. As of the same date, the Company has filed 2,897 patent applications and granted 1,813 patents, and the Company is also funded by the sodium-ion battery industrialization project of the Jiangsu Provincial Department of Industry and Information Technology.

The power battery unicorn "Zhengli New Energy" went to Hong Kong for IPO, and FAW Hongqi and GAC Trumpchi were customers

The company has developed a number of industry-leading battery technologies. With strong R&D capabilities, the company has created a series of competitive products: high-energy density fast-charging lithium iron phosphate batteries, PHEV and EREV batteries, HEV batteries, Qiankun batteries (BEV battery packs), Qilong batteries (BEV battery packs), aviation batteries.

Zhengli New Energy is the first company in China's power battery industry to obtain the AS9100D aerospace quality management system certification, and it is also the first batch of "low-altitude economy" pilot enterprises in Suzhou. The energy density of the company's aviation battery products exceeds 320Wh/kg, which can be quickly charged to 80% in 15 minutes, and can still achieve high rate discharge of over 12C in a low power state of 20%, and the products can achieve aviation-grade safety standards.

The company designs and builds a software-defined battery cell digital factory, pioneers the ZOE operational excellence platform, develops the "MOM" customized production system, replaces manual inspection with "non-contact" AI visual quality inspection technology, and builds a quality closed-loop control system with AI edge computing technology, so that the company can continue to reduce costs and increase efficiency.

In 2023, the automation rate of the company's main production lines (the percentage of machines and equipment that can be operated without any human intervention) will exceed 95%, which is significantly better than the industry average. The company's product development and manufacturing speed is industry-leading, and the PHEV product cooperated with a world's leading car company takes only one year from project designation to production and delivery.

As of March 31, 2024, the total designed production capacity of Zhengli Xinneng battery cell products is 25.5GWh. The company's main production lines are all located in Changshu, which can achieve unified operation and management. Typically, companies are able to smoothly allocate resources between sites, with exception response times as little as 30 minutes. In addition, the company adheres to a steady order-oriented capacity expansion strategy, which helps to avoid overcapacity and reduce the waste of production resources.

According to Frost & Sullivan, driven by factors such as the acceleration of transportation electrification, the progress of power battery technology, favorable government policies, and the continuous reduction of power battery costs, the sales volume of the entire power battery industry is expected to grow rapidly. The EV battery market is also expected to experience the following trends, such as continuous technological innovation and breakthroughs in battery performance, cost reduction, increased industry concentration, closer cooperation between battery manufacturers and OEMs, increased importance of flexible manufacturing capabilities, more diversified business models, and battery standardization.

During the Track Record Period, Zhengli New Energy achieved rapid growth in operating performance. The Company's revenue increased from RMB1,499 million in 2021 to RMB3,290 million in 2022 and further to RMB4,162 million in 2023, representing a CAGR of 66.6%. The Company's revenue increased by 224.2% from RMB227 million for the three months ended March 31, 2023 to RMB737 million for the three months ended March 31, 2024.

In 2021, 2022, 2023 and the three months ended March 31, 2023 and 2024, the Company's net loss was RMB402 million, RMB1.720 billion, RMB590 million, RMB168 million and RMB69.9 million, respectively. The Company's net loss during the Track Record Period was mainly attributable to the Company's significant investment in technology and product development in accordance with its "5-3-1" forward-looking R&D strategy based on the IPD process; significant expenditures have been incurred in expanding production capacity; historical product mix and pricing strategy; the one-off effect of the customer's cancellation of the purchase order during the track record period; and fluctuations in the prices of raw materials during the track record period.

Zhengli New Energy invests a lot of resources in technological innovation and product development. As of the Latest Practicable Date, the Company's investment in marine and air dual-use battery products has not yet achieved large-scale commercialization. In 2021, 2022, 2023 and the three months ended March 31, 2024, the Company's R&D expenses were RMB221 million, RMB329 million, RMB424 million and RMB129 million, respectively, accounting for 14.7%, 10.0%, 10.2% and 17.5% of the Company's total revenue for the same period.

The funds raised from Zhengli New Energy's Hong Kong IPO are intended to be used for capacity expansion and the construction of intelligent manufacturing facilities and flexible production lines; for various research and development activities; and for working capital and other general corporate purposes.

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