Breakingviews – Nickel IPO puts Jakarta at center of China’s electric car boom – Reuters | CarTailz

HONG KONG, Nov 23 (Reuters Breakingviews) – A Hong Kong listing puts Jakarta at the heart of China’s electric car boom. Lygend Resources & Technology (2245.HK), a Chinese nickel trader, is looking to raise up to $594 million in an IPO to expand in Indonesia. The company’s presence in the resource-rich archipelago allows it to export large quantities of the metal, which is in high demand at home.

Lygend trades and manufactures nickel products essential to stainless steel and batteries. Revenue more than doubled year-on-year to nearly 10 billion yuan, about $1.4 billion, in the first half of 2022; Its net income grew even faster to 2.3 billion yuan thanks to a roughly 20% rise in the price of the heavy metal since the start of the year.

Lygend’s Indonesian activities give him an advantage. Roughly one-fifth of the world’s nickel resources are in the land, which accounted for nearly 40% of the ore excavated last year, according to the company’s prospectus. For comparison, China, the world’s largest maker and buyer of electric cars, has less than 2% of known nickel reserves, according to the US Geological Survey.

However, there are political risks. In 2020, President Joko Widodo accelerated an export ban on the commodity nickel ore, forcing the industry to bring smelting onshore even as Covid-19 hit demand. Lygend’s sales fell 17% this year before the company began processing the metal with its local partner onshore. Business has since bounced back, but Lygend warns the export ban could be extended to products refined from the ore.

At the midpoint of its marketed price range, Lygend would be valued at just over $4 billion. That’s about 5.5 times this year’s earnings, assuming the same first-half growth rate, and is in line with the average of a number of peers, including Brazilian company Vale (VALE3.SA) and compatriot Tianqi Lithium (002466 .SZ) and Ganfeng Lithium ( 002460.SZ). That looks reasonable: The recent Hong Kong listings of electric car maker Zhejiang Leapmotor Technology (9863.HK) and battery maker CALB (3931.HK) resulted in lackluster debuts, while the benchmark Hang Seng Index (.HSI) has had a wild few months , which is up 19% since early November but is still down a quarter this year. Lygend is expected to take a bumpy road to public markets.

Bumpy ride: Hong Kong markets are volatile

Follow @KatrinaHamlin on Twitter

(The author is a Reuters Breakingviews columnist. Opinions expressed are her own.)

CONTEXT NEWS

China’s Lygend Resources & Technology, which makes and trades nickel products such as nickel-cobalt compounds used in electric car batteries, plans to raise as much as $594 million in a Hong Kong IPO, according to its prospectus published on Nov. 21. At the high end at the advertised price range, the deal would value Lygend at $4.6 billion.

Lygend plans to use 56% of the proceeds to develop and construct nickel production projects on the Indonesian island of Obi. It also plans to bring additional capital into a joint venture with Contemporary Amperex Technology (CATL) to develop electric vehicle products.

Hong Kong CATL is the largest cornerstone investor, according to the prospectus.

The company had first applied for an IPO in the city in February before its application expired in August.

(The author is a Reuters Breakingviews columnist. Opinions expressed are her own.)

Edited by Robyn Mak and Thomas Shum

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias under the Trust Principles.

Katrina Hamelin

Thomson Reuters

Katrina Hamlin is a Global Production Editor based in Hong Kong. She is also a columnist, writing on topics such as environmental policy, cleantech and green finance, and the gaming industry in Macau and Asia. Before joining Reuters in 2012, Katrina was Deputy Editor-in-Chief of Shanghai Business Review magazine. She holds an MA in Classics from the University of Oxford and a Masters of Journalism with honors from the University of Hong Kong.

Leave a Comment