Jixiang shares plan to chase "lithium" for 480 million yuan. The company that wants to be questioned will produce 25000 tons of lithium salt in the first half of the year.

Dual-main development of Jixiang shares (603399.SH) has a "lithium" thought, but this plan was questioned by the Shanghai Stock Exchange as soon as it was launched. A reporter from the Financial Associated Press is concerned that Jixiang shares have successively put forward a number of cross-border M & A plans in recent years, but most of the M & A plans were terminated after being questioned by the exchange. The reporter learned from Jixiang shares that the company is well prepared for this acquisition, and the target company Hunan Yongshan 25000 tons of lithium salt production is very likely to be put into production in the first half of the year.

On the morning of January 15, the relevant person in charge of the company told the Financial Associated Press that Hunan Yongshan's main business and the company's existing molybdenum business both belong to the mining industry, and there is greater cooperation in business, and their production and marketing models are also similar. Therefore, it is not considered cross-border. "both sides of the related party transaction know the bottom and are not betting against performance promises, and the possibility of success is still greater."

480 million yuan to chase "lithium"

On the evening of January 6th, Jixiang shares announced that it planned to buy Ningbo Yongshan's 100% stake in Hunan Yongshan with 480 million yuan in cash and enter the lithium power industry across the border. It should be pointed out that Ningbo Yongshan is a wholly owned subsidiary of Chinese fir shares (600884.SH). Jixiang shares and Shanshan shares are actually controlled by Zheng Yonggang, both of which belong to the listed company of Cunninghamia lanceolata. This transaction constitutes a related party transaction.

On the evening of the same day, the Shanghai Stock Exchange conducted a detailed inquiry on the details of its acquisition. Jixiang shares are required to explain whether the underlying assets acquired from related parties have a synergistic effect with the company's existing business, and whether the company has the corresponding capabilities and conditions to realize the effective operation and control of the underlying assets, as well as the rationality and necessity of this transaction.

According to the announcement, Hunan Yongshan, the subject of the sale, mainly produces products such as lithium carbonate and lithium hydroxide, which are the main raw materials of cathode materials for lithium batteries, and downstream applications include power batteries and energy storage batteries. Jixiang shares are molybdenum metal production and processing enterprises, the implementation of molybdenum products business + film and television business double main business development model.

For the reasons for the acquisition, Jixiang shares said that the company is in the molybdenum production and processing industry, affected by macroeconomic fluctuations, changes in upstream and downstream market demand and other factors, the industry fluctuates greatly, leading to the company's performance fluctuations in recent years. This time, through the acquisition of the target company, the business sector will be extended to the field of new energy.

In terms of business synergy, Jixiang shares believe that both the original smelting business and Hunan Yongshan belong to the mineral processing industry, and the company has rich industry experience in this field and has strong industrial cooperation with Hunan Yongshan. After the completion of this transaction, Jixiang will continue to focus on the processing and production of metal minerals, optimize the company's product structure, reduce the impact of fluctuations in the molybdenum industry on the company's operating performance, and improve the company's risk resistance and sustainable profitability.

According to the exchange, as of September 30, 2021, the underlying assets are under construction of 386 million yuan; the net profit in 2020 is-4.8897 million yuan; and the net profit from January to September in 2021 is 6.3145 million yuan. The Shanghai Stock Exchange requires the company to supplement the disclosure of the business model of the underlying assets, the competition pattern of the industry to which it belongs, and the status of the industry, indicating whether the underlying assets have full production and operation capacity.

The person in charge of the aforementioned company believes that one of the close concerns of the exchange on this acquisition is that Hunan Yongshan is a project under construction. According to the reply notice, Hunan Yongshan's main business is battery-grade lithium hydroxide production, battery-grade lithium carbonate production and battery-grade lithium carbonate foundry, of which the first two are "purchase-production-sales" mode, and the last one is contract manufacturing mode.

In terms of production and management capacity, Hunan Yongshan, which was established in 2019, has planned to set up a lithium salt construction project of 45000 tons / year, of which the first phase of 15000 tons / year lithium hydroxide and 10, 000 tons / year lithium carbonate production project has been in the stage of equipment installation and commissioning by the end of 2021 and is expected to be completed and put into operation in June 2022. According to the plan, the production lines of 15000 tons / year battery-grade lithium hydroxide and 5000 tons / year battery-grade lithium carbonate in the second phase of the company will also be completed and put into production within 3 years.

Shanshan shares said that Hunan Yongshan is currently in the construction investment period, the future still needs continuous capital investment and operating capital support.

According to the financial report, in the first three quarters of 2021, Jixiang's revenue reached 2.96 billion yuan, up 79.01% from the same period last year; net profit was 42.9005 million yuan, up 128.55% from the same period last year; and 41.7818 million yuan was deducted from non-net profit, up 126.25% from the same period last year. By the end of the reporting period, the company's net cash flow was 421 million yuan.

It should be pointed out that Jixiang shares have high expectations for this merger. "in recent years, downstream industries such as new energy vehicles have developed rapidly. With the company's sufficient financial support and professional operation and management, the target company will have good development prospects and can provide better performance returns for the company." That's what the company says.

The performance of the underlying assets is worth looking forward to.

As the key raw materials in the upstream of the new energy vehicle industry chain, lithium carbonate and lithium hydroxide have been rising in volume and price for more than a year with the continuous hot sale of new energy vehicles.

Baichuan Yingfu cathode materials expert Ji Zewei told the Financial Associated Press that behind the sharp rise in the price of lithium carbonate products is a high imbalance between supply and demand, which is difficult to change fundamentally in the short term.

According to incomplete statistics, there are more than 10 listed companies in the cross-border lithium industry in the second half of 2021 alone. Benefiting from the hot market, the secondary market has been "rising with lithium" for many times. In the first three quarters of 2021, the revenue and net profit of Tianqi lithium industry increased by 59.58% and 148.02% respectively compared with the same period last year, while the revenue of Ganfeng lithium industry increased by 81.19% year on year, and the net profit increased by 648.24%.

The Financial Associated Press reporter noted that the reply notice also publicized the existing production letters of intent and contract manufacturing business orders of Hunan Yongshan, specifically, Hunan Yongshan has signed a "letter of intent" with BASF. It is agreed that after it is put into production, it will be supplied in bulk to the relevant production bases of BASF battery materials, including battery-grade lithium hydroxide and battery-grade lithium carbonate products. In addition, the company has reached a strategic cooperation intention with downstream power battery customers such as Honeycomb Energy on the investment and development of lithium resources, lithium salt supply, lithium salt product processing and so on.

In fact, Hunan Yongshan's ambition does not stop there. According to the announcement, the company will deepen its cooperation with BASF and further extend to BASF's global cathode material supply chain system. Jixiang said that the lithium industry is a technology-and talent-intensive industry, while Hunan Yongshan has a competitive advantage in both areas.

According to a reporter from the Financial Associated Press, the acquisition of Hunan Yongshan by Jixiang shares is quite similar to the previous Tianhua Super Clean (300390.SZ) cut into the lithium industry.

The original main business of Tianhua Super Clean is anti-Static ultra-clean technology products and medical device products. In 2018, the company and Changjiang Morning Road, Ningde Times (300750.SZ) and other companies jointly invested in Tianyi lithium industry, cut into the lithium power industry. In November 2020, the company completed the acquisition of 26% of Tianyi Lithium Industry, increasing its shareholding to 68%, becoming its controlling shareholder.

Data show that Tianyi Lithium Industry's first phase of the annual production of 20,000 tons of battery-grade lithium hydroxide project will be put into production in 2020, and mass production and shipment will be achieved in the first half of 2021.

In April 2021, Tianyi Super net 780 million yuan will be increased to the ground, and the company plans to invest in the "Battery Lithium hydroxide Phase II Construction Project" through its subsidiary Tianyi Lithium Industry. After the second phase of the project reaches production, the total capacity of Tianyi Lithium hydroxide will reach 45000 tons / year.

In terms of production capacity, whether it is the first phase of the project or the master planning project, the scale of Tianyi lithium industry is very close to that of Hunan Yongshan. It is worth mentioning that as of January 14 closing, Tianhua ultra-net market capitalization of nearly 40 billion yuan.

The transaction price is cautious.

The announcement shows that on the evaluation base date, September 30, 2021, Hunan Yongshan's audited shareholders' equity was 301.272 million yuan, and the total equity value of shareholders evaluated by the income method was 483 million yuan, with a value-added rate of 60.32%. The transaction price was finally set at 480 million yuan.

Some industry insiders said to the Financial Associated Press reporter that compared with similar recent acquisition cases, this consideration is obviously on the low side.

For example, in September 2021, Yabao Chemical announced plans to acquire Guangxi Tianyuan New Energy Materials, a Chinese lithium producer, whose main production capacity is 25000 tons / year of battery-grade lithium hydroxide, similar to the scale of Hunan Yongshan Phase I project. but the purchase price is 200 million US dollars, or about 1.3 billion yuan, which is 2.7 times the offer price of Shanshan shares.

In this regard, the relevant person in charge of the above-mentioned companies said that the transaction price is on the high side or on the low side, depending on which level, if it is from the pure PE valuation, such as the current market head of Tianqi Lithium Industry and Ganfeng Lithium Industry, they are all through the entire vertical industrial chain, there are mines upstream, and the intermediate technology is also mature, so their PE valuation may be relatively high.

In view of the comparison with the purchase price of Tianyuan Lithium Industry in Guangxi, the relevant responsible person of the above company pointed out that Tianyuan Lithium Industry in Guangxi was in the same state as Yongshan in Hunan at the end of 2017, and it had been officially put into production by 2020, and the production capacity had been completed in the past two years. Relatively speaking, it has a relatively mature industrial chain. The target company, Hunan Yongshan, will not be built until the end of 2020, and it is still under construction, and sufficient financial support is needed for subsequent production and operation.

"We are not undervalued, but more cautious." He said.