On the evening of December 14, REPT BATTERO Energy Co., Ltd. (hereinafter referred to as "REPT BATTERO"), which specializes in power and energy storage batteries, submitted an IPO prospectus to the Hong Kong Stock Exchange. It ranks among the top ten domestic power battery installed capacity companies. of companies have gone public or started the IPO process.

REPT BATTERO's revenue growth rate during the reporting period can be described as "thriving by leaps and bounds." Operating income from 2019 to 2021 was 233 million yuan, 907 million yuan, and 2.109 billion yuan respectively, with a three-year revenue compound growth rate as high as 200.7%. Even so, REPT BATTERO is still in a state of loss, with losses of 112 million yuan, 53 million yuan and 804 million yuan respectively during the same period.

The reason for the loss may be related to the insufficient utilization rate of REPT BATTERO's production capacity. As of the end of the third quarter of 2022, the cumulative battery scale produced by REPT BATTERO during the year was only 9.5GWh, which is still significantly different from its designed annual production capacity of 32.7GWh.

As a member of Tsingshan Group, a major nickel industry company, 51% of REPT BATTERO's shares are controlled by Yongqing Technology Co., Ltd. (hereinafter collectively referred to as "Tsingshan Group"), a subsidiary of Tsingshan Group. It is a subsidiary of this mining giant involved in the field of power batteries. The only player.

Backed by Tsingshan Group's numerous nickel-cobalt-lithium ore resources, REPT BATTERO's raw material cost fluctuations have become relatively controllable, but this has also brought it a huge amount of related-party transactions. Trade Wind (ID: TradeWind01) estimates based on the annual framework agreement between REPT BATTERO and Tsingshan Group that from 2023 to 2025, REPT BATTERO's raw material procurement from Tsingshan Group will exceed a maximum of 30 billion.

The new energy battery track, which has been in a state of high prosperity in recent years, is being regarded as the goal of integrated development by more upstream and downstream enterprises in the industry chain.

REPT BATTERO has focused on power and energy storage battery business since its establishment in October 2017.

At present, REPT BATTERO's power batteries have been adapted to traditional car companies such as SAIC-GM-Wuling and Dongfeng, and are also supplied to new car companies such as Leapmotor and Nezha. From 2019 to 2021, REPT BATTERO's power batteries generated revenue of 83 million yuan, 673 million yuan, and 982 million yuan respectively, accounting for 35.5%, 74.2%, and 46.5% respectively.

Although the gap between its revenue scale and the leader CATL (300750.SZ) is as much as 91 times, it still ranks among the tenth among domestic power battery manufacturers with an installed capacity of 3.6GWh in the first three quarters of 2022. Due to the ramp-up stage of production capacity, REPT BATTERO's power battery gross profit margin in the first half of 2022 is only 5%, which is significantly different from CATL's 15.04% in the same period.

According to REPT BATTERO, the energy density of its power batteries has reached a high level in the industry. For example, the volume energy density of its "Wending" battery launched in August 2022 can reach 450Wh/L, exceeding the current industry level of 400Wh/L. , the cruising range can reach 700 kilometers.

Compared with power batteries with a higher degree of involution, REPT BATTERO seems to have more advantages in the field of energy storage. Frost & Sullivan data shows that in the first three quarters of 2022, REPT BATTERO has ranked third in the country with an installed capacity of 5.9GWh of energy storage batteries. However, it has an installed capacity of 21.8GWh in the same period as CATL, which ranks first in this field. There is still a clear gap.

At present, REPT BATTERO's energy storage batteries have been used in household energy storage, photovoltaic inverters and other scenarios.

"Ripu's shipments are basically in the form of batteries or modules. The top 10 energy storage system integration companies in the country are all our customers. We have done a lot in the field of home storage." Ripu Lanjun Liu Si, general manager of the energy storage system division, publicly stated in November this year.

In the first half of 2022, REPT BATTERO's energy storage batteries generated revenue of 1.881 billion yuan, accounting for 46.8%. However, the gross profit margin during the same period was only -12%, which has narrowed compared with the -16% gross profit margin in the first half of 2021.

The gross profit margins of the power battery and energy storage businesses are low or even negative, which may be related to the fact that REPT BATTERO is in the production capacity ramping stage.

As of the end of the third quarter of 2022, REPT BATTERO's designed annual production capacity has reached 32.7GWh. However, in terms of installed capacity, the total production capacity of "power + energy storage" batteries in the first three quarters of 2022 is only 9.5GWh.

REPT BATTERO also regards expanding production capacity as the key to increasing revenue. In August this year, REPT BATTERO has set the goal of "200GWh production capacity in 2026" and even plans to achieve sales revenue of 100 billion yuan in 2027.

Being able to achieve such a large-scale goal as scheduled is obviously a test of REPT BATTERO's future production capacity and competitiveness.

Unlike BYD, Great Wall and other downstream OEMs that promote the listing of their battery businesses, the origin of REPT BATTERO comes from the incubation of domestic mining giant Tsingshan Group.

The prospectus shows that Tsingshan Group’s entities control 51% of REPT BATTERO’s shares, and this is also Tsingshan’s first subsidiary to embark on an IPO journey.

As the king of nickel mines, Tsingshan Group accounts for 22.22% of the global market with an annual output of 600,000 tons of nickel in 2021. It is also involved in many fields such as mine development, stainless steel manufacturing, and maritime logistics.

What has made Tsingshan Group "out of the circle" recently is undoubtedly the "nickel futures short squeeze war" of the London Metal Exchange (hereinafter referred to as "LME") in March 2022.

At that time, due to spot risk management, Tsingshan Group, which held a large number of short positions in Lunni, suffered a short squeeze from the sharp rise in nickel prices on the 8th of that month. The price of the Lunni futures contract fell from US$60,000/USD in less than an hour. Ton climbed to US$100,000/ton, which in turn triggered the risk of liquidation of Tsingshan Group. Out of risk prevention, the Lunjin Exchange even temporarily suspended trading in all Lunnickel contracts.

Fortunately, by reaching an agreement with counterparties and financial institutions, the liquidation crisis of Tsingshan Group was finally resolved smoothly.

REPT BATTERO is currently the only company under the Tsingshan Group engaged in the battery business. Backed by the resource endowment of shareholders, REPT BATTERO has obvious synergies with Tsingshan Group in the procurement of minerals such as nickel, lithium and cobalt required in the lithium battery field.

Since 2022, everything from power batteries to OEMs have been under pressure from skyrocketing lithium prices. For example, Frost & Sullivan estimates that the average price of lithium phosphate in 2022 will be 470 yuan, 15.16 times that of 2021.

Although relying on mining giants can achieve a certain degree of "first-come-first-serve" on the raw material side, REPT BATTERO has not been able to avoid final product price increases in 2022 when battery materials are skyrocketing.

In the first half of 2022, the average selling price of REPT BATTERO's power batteries was as high as 0.76 yuan/Wh, a year-on-year increase of 55.10%; during the same period, the average selling price of energy storage batteries was 0.75 yuan/Wh, a year-on-year increase of 27.12%.

As the controlling shareholder, Tsingshan Group is also "preparing for rainy days" in the supply of lithium mines. In November this year, it announced that it had reached a cooperation with the government of Zimbabwe, which has one of the largest hard rock lithium reserves in the world, to start local lithium mining and processing operations.

However, precisely because of this upstream and downstream binding relationship, the scale of related transactions between REPT BATTERO and Tsingshan Group will gradually expand.

From 2020 to the first half of 2022, the amount of raw materials purchased by REPT BATTERO from Tsingshan Group was only 16 million yuan, 212 million yuan, and 44 million yuan respectively. However, in the next three years, the amount of raw materials purchased by REPT BATTERO from Tsingshan Group will be It may rise further.

According to the framework agreement between the two, REPT BATTERO's raw material procurement from Tsingshan Group from 2023 to 2025 can reach a maximum of 3.825 billion yuan, 11.125 billion yuan and 16.642 billion yuan respectively.

Because some customers of REPT BATTERO need to be connected with Tsingshan Group, there are also large-scale related transactions with it on the sales side. According to the framework agreement between the two, sales to Tsingshan Group will reach 4.3 billion yuan in 2023.

In the context of strict review of related transactions for A-share IPOs, this may also explain the internal reason why REPT BATTERO did not choose an A-share IPO this time and instead set the listing place as the Hong Kong stock market.

For example, the blocked spin-off project of BYD (002594.SZ) - BYD Semiconductor Co., Ltd. (hereinafter referred to as "BYD Semiconductor") recently withdrew its Application materials during the registration process. Multiple market information sources pointed out that BYD Semiconductor and BYD Large-scale related-party transactions were the main reason for the failure of its IPO.

The market is waiting to see whether REPT BATTERO's Hong Kong stock IPO journey will go smoothly.