New energy battery giant to raise $834m from Shenzhen IPO

Contemporary Amperex Technology Ltd, the world's biggest electric vehicle battery producer by sales, said it will start the subscription period for its shares on Wednesday, in a bid to raise 5.35 billion yuan ($834 million) for further expansion.

CATL's IPO would be the largest-ever fundraising on the Shenzhen Stock Exchange's Growth Enterprise Market. Regulators approved its application within only 24 days - a record.

The Fujian province-based company plans to sell a 10 percent stake at 25.14 yuan a share, according to its latest prospectus. The new funding target is 59 percent lower than the previous goal of 13.12 billion yuan the company stated late last year.

"The reduced target is a result of the company's dampened profits and the financial market's increasingly rational sentiment toward unicorn companies," said Xiao Suo, an analyst at Huajin Securities Co Ltd. Unicorns companies are startups with a $1 billion valuation.

CATL reported its net profit, after extraordinary gains and losses, fell 16 percent year-on-year to 2.47 billion yuan in 2017. During the same period, major Chinese automobile-related electric battery firms reported annual losses, amid a glut of capacity and the phasing out of subsidies for the sector.

China has been cutting financial incentives for new energy cars after years of market stimulation. Subsidies will cease altogether by the end of 2020, according to the Minis-try of Industry and Information Technology.

Thanks to its world-leading supply chain and customer base, CATL would be able to find other sources for the rest of the funding if it needed, Xiao said. "Possible ways include a private placement and debt-to-equity swaps."

CATL's sales ranked No 1 among the world's top battery producers in 2017, according to Shenzhen Gaogong Industry Research Co Ltd. So far, the company has set up branches in France, the United States, Canada and Japan.

According to CATL Chairman Huang Shilin, the company expects to raise its production capacity to 30 gigawatt-hours by the end of 2019 and 50 GWh by 2020 - more than double its 2017 production total.

Japanese business daily Nikkei reported in May that CATL will likely be supplying batteries to Japan-based Nissan Motor Co Ltd and France's Renault SA for a series of new electric cars for the Chinese market. German carmaker Daimler AG agreed a contract with CATL for electric car batteries, according to financial magazine Caijing.

Brokerage company Huajin Securities Co Ltd forecast that CATL's return on equity would stand at 9.5 percent in 2018, and 12.1 percent in 2019.