Divine material plans to issue no more than 2.561 billion convertible bonds to expand the production of lithium hexafluorophosphate and other electrolyte materials

On the evening of December 10th, Tianci (002709) announced that the company intends to publicly issue convertible bonds to raise no more than 2.561 billion yuan. It is used in the project with an annual output of 152000 tons of lithium electricity new materials (including 150000 tons of liquid lithium hexafluorophosphate and 2000 tons of lithium difluorophosphate), 20, 000 tons of lithium difluorosulfonimide, 62000 tons of electrolyte basic materials, 60, 000 tons of daily chemical basic materials (phase I) and supplementary liquidity.

Enhance the capacity reserve of raw materials for electrolyte production

Since the second half of 2020, with the recovery of demand for new energy vehicles, the supply and demand of lithium hexafluorophosphate is tight, and the price continues to rise. The price of lithium hexafluorophosphate fluctuates periodically and has rebounded since September 2020, rising from 88500 yuan / ton to 565000 yuan / ton, an increase of 538.42%.

Affected by the upward price of lithium hexafluorophosphate, the overall gross profit of the electrolyte industry has been squeezed. Thanks to the self-produced advantage of the core raw material lithium hexafluorophosphate, the gross profit margin of the lithium-ion battery materials business of Divine Materials remains higher than the average level of comparable listed companies in the same industry, and has increased steadily.

It can be predicted that due to the upward transmission of the cost reduction pressure of the new energy terminal, the cost pressure of the battery material end is relatively large, and the powerful enterprises in the industry will continue to integrate the upstream and downstream industrial chains and expand their production capacity, so as to achieve large-scale cost control and continue to enhance their core competitiveness. By increasing the production capacity of lithium hexafluorophosphate, on the one hand, it helps to enhance the strategic capacity reserve and respond to customer demand in a timely manner; on the other hand, it meets the raw material demand of the company's electrolyte production and comprehensively realizes cost reduction and efficiency benefits. further improve the company's overall profitability and core competitive advantage.

In addition, the oversupply of lithium hexafluorophosphate in 2017 and the collapse in prices triggered the first round of industry reshuffle, and some small and medium-sized enterprises were eliminated because of their low capacity utilization and inability to break even. From 2016 to 2020, industry concentration remained basically stable, with CR3 fluctuating around 50%. Entering 2021, under the background of better demand, the head manufacturers have stepped up their capacity expansion, and it is expected that the industry concentration will further increase in the future.

As one of the few international high-quality electrolyte production companies in the industry with self-production capacity of electrolyte lithium salts and additives, thanks to the long-term good quality reputation and supply guarantee ability, Tianci began to sign long-term supply agreements with customers such as Ningde era and LG in 2021, locking electrolyte production behind, customers pay more attention to the tight supply of lithium hexafluorophosphate capacity at this stage. The company has also signed a strategic cooperation agreement with Tesla to further expand the resources of foreign high-quality automobile customers.

Plus Fluoro Chemicals and electrolyte Additives Business

On the same day, Tianci also announced that the company and its wholly-owned subsidiary, Tiantong (Nantong) Co., Ltd., plan to purchase all the assets of Jiangsu Zhongrun Fluoro Chemical Technology Co., Ltd. (hereinafter referred to as "Jiangsu Zhongrun"). Including land use rights and special assets such as above-ground structures, buildings, projects under construction, engineering materials, inventory and other special assets located in Huanghai Road, Yangkou Chemical Industrial Park, Rudong County, Nantong City, Jiangsu Province, as well as the 23.7037% equity of Zhejiang Tianshuo Fluorosilicon New material Technology Co., Ltd. (referred to as "Zhejiang Tianshuo"), confirmed through consultation between the two parties, take the evaluation value as the pricing basis.

Jiangsu Zhongrun is a company mainly engaged in the R & D, production and management of fluorinated refrigerants, fluorinated polymers and fluorinated electronic chemicals. One of the main businesses of Tianci materials is lithium materials, and the core of lithium materials is fluorine-containing chemicals, especially fluorine-containing fine organic chemicals and fluoropolymers are the development direction of lithium materials.

Through this acquisition, Tianzhi Materials can effectively make use of the existing equipment of Jiangsu Zhongrun, through technological upgrading and transformation, combined with the company's strategic development plan for the integration of lithium materials industry chain, continue to extend the R & D and production of fluorinated chemicals and fluoropolymer materials, and further strengthen the company's leading position in the field of lithium materials, with significant synergy.

In addition, Jiangsu Zhongrun is located in Yangkou Chemical Industrial Park in the northwest of Rudong County, Jiangsu Province. It is a chemical professional industrial park with complete facilities and industrial agglomeration in East China. From 2015 to now, major chemical provinces, including Jiangsu, have successively announced that they will no longer approve new chemical parks, and the examination and approval of chemical projects has become stricter, resulting in the chemical park land becoming a scarce resource in the eastern coastal areas.

With the continuous expansion of business, in recent years, Tianzhi Materials has successively invested in Zhangjiagang Jimut, Jiangsu Tianzhi, Nantong Tianzhi and other subsidiaries in East China, and supporting the construction of electrolyte, lithium salts, additives and other lithium materials projects, mainly for supporting lithium materials downstream battery manufacturers to build factory demand, close to customer supply. Among the Jiangsu Zhongrun assets acquired this time, there are 496 mu of land, 130 mu of utilized land and 366 mu of remaining available land, which can provide sufficient chemical land resources for the company to build an integrated production base in East China in the future.

At the same time, with the stricter environmental protection policy of the chemical industry, the environmental risk faced by the company is increasing day by day. The construction of East China lithium production base can effectively disperse the environmental protection policy risk of the company, which is conducive to the long-term development of the company.

The company is currently a leading enterprise of electrolyte for lithium battery materials, and has been the first in the market for electrolyte shipments for four consecutive years. In recent years, the company's demand for raw materials for lithium battery electrolyte has increased greatly. Zhejiang Tianshuo is focused on the R & D and production of electrolyte additives. At present, the main products are vinyl carbonate (VC) and vinyl sulfate (DTD). Affected by the high prosperity of the downstream new energy industry and the mismatch of the existing production capacity of vinylidene carbonate (VC) market and the recovery of lithium iron phosphate market, VC has become a shortage link in electrolyte production in 2021, causing its market price to soar from 150000 yuan / ton to 500000 yuan / ton. VC itself belongs to fluorine chemical industry, with strict EIA audit, certain threshold of technical process, and generally long production expansion cycle. As one of the few domestic enterprises with VC production capacity, Zhejiang Tianshuo's performance is expected to grow well in 2021, and the market prospect is broad. In addition to VC, another product of Zhejiang Tianshuo is vinyl sulfate (DTD),. At present, Zhejiang Tianshuo has a production capacity of 1000 tons / year DTD. The electrolyte for high nickel ternary battery produced by the company creatively uses positive film forming additives M55 and M235 combined with DTD, lithium difluorophosphate and other additives, which not only ensures that the battery has low film forming impedance, but also greatly suppresses the gas production caused by the oxidation of high nickel positive electrode to the electrolyte at high temperature.

After the acquisition of the minority stake in Zhejiang Tianshuo held by Jiangsu Zhongrun, the proportion of Zhejiang Tianshuo held by the company has been increased to 82.96%, and the problem of joint shareholding between the company and the actual controller has been completely solved, which is conducive to the further optimization and integration of industrial resources. develop the company's electrolyte additive business and increase shareholders' earnings.

It is worth noting that the other party in this transaction is controlled by Xu Jinfu, the actual controller of Tianzhi Materials, so this transaction constitutes a related party transaction. Zhejiang Tianshuo is a company jointly owned by Mr. Xu Jinfu, who is a natural gift material and its actual controller. Among them, Tianzhi material directly holds 59.2593%, Xu Jinfu holds 23.7037% through Jiangsu Zhongrun, which it controls, and minority shareholder Shuo Bo holds 17.037%. After careful evaluation, in order to eliminate the potential risk of inter-industry competition, Tianci decided to acquire its stake in Zhejiang Tianshuo from the controlling shareholder.