Xianhui Technology plans to acquire Dongheng Machinery cut-in Lithium Battery Module structure and deepen binding with Ningde era

688155.SH, a new energy vehicle module / PACK equipment company, announced a major asset acquisition intention last night to acquire a 51 per cent stake in Ningde Dongheng Machinery Co., Ltd. (hereinafter referred to as "Dongheng Machinery") in cash.

Shanhui's shares rose 9 per cent in the two trading days prior to the disclosure of the indicative announcement.

According to Tianyan survey data, Dongheng Machinery was founded in 2014 with a registered capital of 50 million yuan and more than 70 insured people. Dongheng Machinery has no public financing so far, and its three shareholders are all natural persons, including Lin Lizhu, the legal representative, and Shi Zenghui, the major shareholder and real controller who holds 70% of the company's shares. According to the intended transaction plan disclosed this time, Xianhui Technology plans to acquire a certain share of shares from three shareholders respectively.

Dongheng Machinery, which mainly deals with lithium battery module components (battery shell, module / PACK shell, etc.), was selected as a "specialized and special new" enterprise in Ningde in 2018 and an excellent supplier in Ningde era in 2019. Xianhui Technology, which specializes in intelligent automation equipment for new energy vehicles, is also one of the important suppliers in Ningde era.

Zheshang Securities Research News believes that the acquisition of Dongheng Machinery means that Xianhui Technology will be cut into the lithium battery module structure, and the layout of new products is expected to make a breakthrough.

Shanhui Technology prospectus shows that it first officially entered the supply chain of battery automation production line in the era of Ningde in 2019. Only in 2021, Xianhui Technology announced that it won the Ningde Times + Funeng 570 million yuan order in early January, and then won the Ningde Times order in May and July of the same year.

In a recent survey conducted by Wells Fargo Fund and other institutions, Shanhui Technology said that since January 2021, it has been disclosed that it has signed various contracts and fixed notices with Ningde era totaling about 1.258 billion yuan (excluding tax).

In 2021, due to the increase in orders, the supply of lithium-ion equipment in the industry as a whole fell short of demand, and Shanhui Technology suffered from capacity bottlenecks before it went public, the company launched a high-speed capacity expansion.

On the occasion of IPO in 2020, Xianhui Technology raised 640 million yuan for the construction of Wuhan base expansion capacity (350 million) and supplementary liquidity (60 million). The company's secretary recently revealed that its Wuhan factory has been completed in capital construction and the office building is in the process of acceptance. In addition, Xianhui Technology also announced in January 2021 that it would use super-raised funds to invest in Changsha base. At present, Changsha and Shanghai expansion projects are still in the process of applying for construction.

It is worth noting that because the rate of income lagged behind the rate of expansion and the implementation of high equity incentives, Xianhui Technology reported a profit loss in the third quarter of 2021. Q3 had a revenue of 199 million yuan in a single quarter, a year-on-year increase of 131%. But return to the mother net profit loss of 2 million yuan.

Some people in the market and industry believe that the technical barrier of module / pack line is low, but with the gradual improvement of the automation rate of production line, Xianhui technology's technical advantages in intelligent automation equipment and industrial manufacturing data system will become more and more significant.

Because the intelligent automation equipment belongs to the core production equipment of the downstream battery factory, its automation degree and stability have become the key factors that determine the production efficiency and production cost of the downstream market such as Ningde era. therefore, the customization ability and after-sales service requirements of Xianhui technology and other companies are getting higher and higher.

Xianhui Technology has said that customers attach more importance to the service ability and response speed of suppliers, and after the whole line acceptance of the project, the company will also arrange special personnel for distribution, product installation and commissioning, and timely feedback on the implementation effect of the project. at the same time, it also provides customers with services such as staff training. Shanhui Technology has not invested in any molecular company in Ningde before.

Science and Technology Innovation Board Daily today called the office of the board of directors of Xianhui Technology about the progress of the acquisition plan and its expected impact on the company's production capacity. the other party said that so far only the intention of the acquisition had been disclosed, and investors were invited to pay attention to the follow-up developments.

From the point of view of the research and report of the machinery team of Zeshang Securities, Dongheng Machinery Lithium Battery structure is expected to have upstream and downstream coordination with Shanhui Technology New Energy vehicle Automation equipment to further improve the company's production capacity and expand customers at the same time. Strengthen the two-wheel drive development strategy of new energy vehicle equipment and products.

It is worth noting that Dongheng Machinery has a number of wholly-owned subsidiaries related to energy technology in Ningde and Liyang. As we all know, Ningde and Liyang have formed an important power battery industry cluster in China due to the investment of Ningde Times and other companies.

Take Liyang as an example, more than 30 power battery industry chain enterprises have been introduced in 2021, beginning with the agglomeration of domestic well-known power battery leading enterprises, such as Jiangsu era, SAIC, Pu Tailai and so on. The second phase of the advanced power battery industrialization project of Ningde Times and SAIC with a total investment of 12 billion was started in Liyang in June 2021 and is expected to be completed in 2024.

In Ningde, Fujian, the Ningde era has led to the formation of a 100 billion-level lithium new energy industry cluster. In 2021, the industrial added value of Ningde increased by 92.1% compared with the same period last year. In the past two months, Ningde era's investment plan for production expansion has reached 68 billion yuan, of which the latest announcement disclosed on the evening of February 2 this year shows that it will spend 29 billion yuan on three new power battery and energy storage battery projects.

According to Soochow Securities Research and News, the value of module line + pack line is positively related to the degree of automation, and it is roughly estimated that under the assumption of high automation rate, the global market space of module line + pack line from 2021 to 2024 can reach 95.1 billion yuan. Shanhui Technology, as a high-quality enterprise of intelligent equipment for new energy vehicles, accounted for 74% of the revenue of intelligent automation equipment for new energy vehicles in 2020, and some institutions estimated that this business order accounted for more than 90% of the total revenue in 2021.