[SMM Analysis] acquisition of Bamo Technology, Huayu Quzhou Huayu Cobalt Industry chain layout further

SMM4, 26 April: on April 20, Huayu Cobalt disclosed a plan to issue shares to buy assets and raise supporting funds and related transactions, with a plan to buy 100 per cent of the Palmer Technology extended industrial chain for 3.2 billion yuan. According to the announcement, the company intends to issue shares to eight trading parties, including Hangzhou Hongyuan, Xinba New Energy, Wuhu Jingrui, Zhejiang Giant, Jinshi Haofeng, China Securities Investment, Concorde and Zhu Xuesong. Buy its 100% stake in Palmer Technology. According to the transaction agreement, the amount of the transaction is tentatively set at 3.2 billion yuan. At the same time, the company intends to purchase its 15.68% stake in Huayu Quzhou by issuing shares from Cinda. According to the trading agreement, the amount of this transaction is tentatively set at 862.4 million yuan, and the final transaction amount is based on the evaluation value of the underlying assets set out in the asset evaluation report issued by an evaluation institution qualified for securities business. It shall be determined by the parties to the transaction through separate consultation and signing of a formal transaction agreement. Upon completion of the transaction, the listed company will hold a 100 per cent stake in Bamo Technology and a 100 per cent stake in Huayu Quzhou.

It is reported that Palmer Technology, fully known as Tianjin Bamo Science and Technology Co., Ltd., established in August 2002, is a national high-tech enterprise mainly engaged in the research, development and large-scale production of lithium ion battery materials. The company now has a registered capital of 197.89 million yuan, a net asset of 590 million yuan and more than 1000 employees. At the same time, there is a lithium-ion battery material industrialization base with high intelligence level and strong comprehensive strength in Tianjin High-tech Industrial Park and Chengdu Chenga Industrial Park in Sichuan Province. By 2017, the company has an annual production capacity of 25000 tons.

According to Zhongyuan Securities data, Tianjin Bamo Technology is an important supplier of cobalt, a new energy material in China, and has been strategically laying out the upper, middle and lower reaches of the industry chain of new energy batteries. Tianjin Palmer Technology is mainly engaged in the research and development, production and sales of cathode materials for lithium-ion batteries. At the same time, there is a lithium-ion battery material industrialization base with high intelligence level and strong comprehensive strength in Tianjin High-tech Industrial Park and Chengdu Chenga Industrial Park in Sichuan Province. The main customers are Ningde Times, BYD, Ningde New Energy, Samsung and LG. In 2018, Tianjin Palmer Technology achieved revenue of 3.344 billion yuan, down 11.46 percent from the same period last year, and net profit of 86.0903 million yuan, down 34.47 percent from the same period last year. Tianjin Palmer Technology had a net worth of 1.566 billion yuan at the end of 2018.

Another Huayu Quzhou, a subsidiary of Zhejiang Huayu Cobalt Industry Co., Ltd., is mainly engaged in the research and development, production and sales of cobalt, copper and nickel products. The main products include cobalt oxide, cobalt chloride, cobalt sulfate, cobalt carbonate, cobalt oxide and other cobalt salts and cobalt oxides. Huayu Quzhou achieved revenue of 8.645 billion yuan in 2018, an increase of 44.2 percent over the same period last year; net profit was 408 million yuan, down 53.56 percent from the same period last year; and the net asset of Huayu Quzhou was 3.317 billion yuan at the end of 2018. After the acquisition of Bamo Technology and Huayu Quzhou, Huayu Cobalt went further to the layout of the whole industrial chain. Caitong Securities pointed out that the upstream of the company has scarce resources, the middle reaches of the company has expanded production capacity, and downstream has actively distributed ternary precursor products to effectively disperse risks. The market position is solid.

Cobalt prices, according to SMM research, recently foreign cobalt prices continue to rise, the domestic electrolytic cobalt price guidance weakened, and overseas cobalt price speculation as a doubt, the domestic market as a whole supply exceeds demand. In the downstream consumption is still in the doldrums, the rapid price increase of mainstream production enterprises encountered not a few, rigid demand for most of the purchase in batches. The demand for cobalt salt market is stable, foreign media quotations continue to rise, and domestic smelters intend to follow suit, but downstream already has enough stocks as early as the beginning of this month, so the current demand is average. And in the strong bearish mood to continue to follow the rise to build inventory willingness is low, so although the producer quotation has improved, but the actual trading performance is mediocre.