CALB/EVs: battery group has good connections needed to power ahead

Only the strong survive Hong Kong’s tumbling markets. Prospective new listings are a case in point. They are dwindling. Chinese electric vehicle battery maker CALB should survive the cull and come to market regardless.

It takes guts to seek HK$13.6bn ($1.7bn) of fresh equity capital right now. Initial public offering volumes fell more than 91 per cent in the first half. CALB would be one of the biggest listings this year, according to Bloomberg data. Its bankers have taken orders for about 266mn shares at HK$38 and HK$51 per share.

The group’s fast growth and good political connections should help it overcome the reticence of investors.

The flotation of Tianqi Lithium, another Chinese heavyweight in the electric battery supply chain, is fresh in their memories. The company raised $1.7bn in July. The shares languish at their listing price. The benchmark Hang Seng index is down 23 per cent this year.

However, local investor interest remains strong in China’s fast-growing EV industry. CALB has momentum. The group entered the market for electric car batteries just four years ago. It has overtaken global rivals to become the sixth-biggest manufacturer in the world.

In China, CALB comes just third behind battery giants CATL and BYD. CATL, the world’s largest electric car battery maker, is struggling to maintain market share, which fell between July and August.

Measured against peers, the company could be worth about $5bn. Its growth has been impressive. It took just two years for CALB to go from a net loss of $22mn to a net profit of $16mn last year.

CALB started out under the umbrella of one of China’s biggest state-owned aerospace and defence conglomerates. This has kept it well-connected. Perks include generous subsidies and contracts with state-owned automakers such as Guangzhou Automobile Group. Government quotas for EV production and other moves to cut emissions provide plenty of road ahead for CALB.