China EV battery giant CATL's Hong Kong IPO positive for mainland listings: Morningstar
[SINGAPORE] Chinese electric vehicle battery maker Contemporary Amperex Technology Company Limited (CATL) has drawn strong demand in its Hong Kong IPO on Tuesday - the world's largest listing this year.
CATL shares jumped in its Hong Kong trading debut, raising HK$35.7 billion (S$5.9 billion) despite being blacklisted by the Pentagon and amid geopolitical unstability.
Shares of CATL opened at HK$296 on Tuesday, up 13 per cent from their listing price of HK$263.
CATL is the world's largest battery manufacturer, and has a 40% share of the global EV battery market.
CATL's share price performance as it started trading signals strong interest from investors, said Morningstar.
In a report on Tuesday (May 20), Vincent Sun, Morningstar senior equity analyst said that the CATL shares, as the largest maker of electric-vehicle batteries is known, are priced at the maximum indicative price, with close to 50 per cent subscribed by cornerstones.
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'With 15 per cent additional shares issued through over-allotment option, total 135.6 million new H-shares account for 3 per cent of the enlarged capital,' Sun noted.
CATL's primary listing is in Shenzhen, and Morningstar indicated that its shares in Hong Kong were priced at a 7 per cent discount to its China-listed shares.
'The strong interest in CATL probably reflects its industry leadership and the discount to the A-shares,' said Sun. Morningstar's fair value price on its China-listed shares is 260 Chinese yuan versus its last traded price of around 259 Chinese yuan, which it says is fairly valued.
'The dual listing is positive and helps lift sentiment that there will be more quality mainland companies listing in Hong Kong. A Hong Kong listing makes it more accessible to investors interested in China companies and it avoids running into the foreign shareholding limit,' Sun added.
Sun believes that CATL will use most of the proceeds raised in its Hong Kong listing to fund the construction of battery plants in Hungary.
The firm will also aim to complete the first phase of the project and commence the second phase in 2025 for a total remaining capital investment of 4.2 billion euros. The first two phases of the project will have a combined production capacity of 72 gigawatt-hours, amid increasing regulatory requirements on local production, Sun noted.
CATL's biggest customer is Tesla, which accounts for 17% of the EV batteries sold in 2024, noted Macquarie in a note. Other customers include major Chinese automakers including Geely Auto, NIO, Li Auto, as well as foreign brands such as BMW and Volkswagen.
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