Chinese EV Battery Maker CALB Targets Top Three Rivals After IPO

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(Bloomberg) — Newly Hong Kong-listed CALB Co. aims to become a top-three player in the electric vehicle battery industry within five years, Chief Executive Officer Jingyu Liu said.

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Shares in the Changzhou, Zhejiang-based company fell as much as 2.2% to trade as high as HK$37.15, down from a listing price of HK$38. The offering raised about HK$10.1 billion ($1.3 billion), with shares sold at the bottom of a trading range that reached $51.

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“We want to reach the top five in the global electric vehicle battery market within a year and be third within three to five years,” Liu said in an interview with Bloomberg Television.

The company is currently building production lines that will have a combined annual capacity of more than 200 gigawatt hours. “This increase in battery capacity will put us among the first globally,” said Liu, the only female CEO of one of the world’s top 10 battery makers.

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China Aviation Lithium Battery Technology Co., as it is formally known, was formed in 2015 under Luoyang Co., a wholly-owned unit of the China Airborne Missile Academy, which is part of the state-owned aerospace and Defense Aviation Industry Corp. from China Ltd.

The lofty goals for Xpeng Inc. supplier. they come with the need to pay for the expansion. Liu said going public was a “natural next step” in the high-growth sector.

“Our IPO funds will be used for business expansion and R&D,” Liu said. “But our finances have been stable and we have sufficient capital for current needs.”

CALB foresees a “large” increase in domestic market share for batteries as production ramps up, followed by “significant growth” from 2024 in overseas markets, it said.

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The company ranks seventh among global suppliers of electric vehicle batteries, according to SNE Research, but is dwarfed by big Chinese rival Contemporary Amperex Technology Co. Ltd., followed by LG Energy Solution Ltd. and BYD Co. of South Korea, all of whom have deep pockets and equally high ambitions to expand their market share.

Market leader CATL has already unveiled about $20 billion in spending commitments this year on a slate of factories to be built at home, and as far afield as resource-rich Hungary and Indonesia.

As the electric vehicle supply chain grapples with the rising costs of key battery materials such as lithium and copper, CALB has suffered the worst of the industry’s price shocks, Liu said. Margins have continued to grow, with first-quarter profits higher than a year earlier, and second-quarter profits higher than the first, he said.

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“We expect our profits to continue to increase in each subsequent quarter,” he said. “We will reduce supply chain costs by working with our upstream suppliers and recycling batteries.”

Even with a smaller size than initially expected, CALB is the third-largest IPO in Hong Kong this year as mid- to large-sized deals return after a slow first half. Even so, funds raised in the city have fallen by around 75% since the start of January as rising interest rates weigh on markets and keep issuers on the sidelines.

Half of the 18 companies that have listed in Hong Kong after offerings above $100 million this year ended their first session underwater. Five finished little changed and only four moved up on the first day.

CALB’s debut comes a week after a disastrous first day of trading for Chinese electric vehicle maker Zhejiang Leapmotor Technology Co., which fell 34% after raising $800 million in an IPO that was priced at the bottom of the traded range. The slide was the biggest first-day drop for a listing of this size or larger recorded in Hong Kong.

Huatai International Ltd. is the sole sponsor of CALB’s Hong Kong IPO.

(Update stock performance in second paragraph)