Although the share price is losing ground, the immediate difficulties seem to be "unbeatable" of 603906.SH.
Zhitong Financial APP noted that a few days ago, Dragon Technology submitted an application to the Hong Kong Stock Exchange for an overseas public offering of shares (H shares) and listing on the main board of Hong Kong shares. Prior to this, as an old face in the capital market, Longyi Technology was successfully listed on the Shanghai Stock Exchange as early as 2017.
It is worth mentioning that, unlike today, most of the company's revenue comes from lithium iron phosphate cathode materials, in the early years, Dragon Technology's business was mainly focused on automotive environmentally friendly fine chemicals, including the production of lubricating oils and engine coolants. It was not until the third year after listing that Longchuan Technology began to get involved in the business of lithium iron phosphate cathode materials.
Times have changed, and although Longchuan Technology has grown into a leading manufacturer of lithium iron phosphate cathode materials, the company's performance is very volatile. Take the company's latest financial data as an example. In the first half of this year, Longyi Technology achieved an income of 3.814 billion yuan (RMB, the same below), a sharp drop of 36.5% compared with the same period last year, while its net profit was-811 million yuan, which was mired in losses. The performance "faded", while the A share price of Longyi Technology also fell endlessly, which has fallen nearly 50% so far this year, which is like "halving".
Six years after the A-share listing, Longyi Technology has turned its attention to Hong Kong stocks. So, can Dragon Technology realize its new capital dream in Hong Kong? What about the growth prospects of the company?
The main business is stuck in cyclical performance and faces challenges.
The operating history of Longyi Technology can be traced back to 2003. At the beginning of its establishment, the company mainly provided lubricating oil and engine coolant to the market. With the development of business, Longchuan Technology has formed a certain competitiveness in many market segments of lithium iron phosphate cathode materials and automotive environmental protection fine chemicals industry.
In terms of performance, Longyi Technology has been on a roller coaster in the past few years. Data show that during the period from 2020 to 2022, the income of Longyi Technology was 1.915 billion yuan, 4.054 billion yuan and 14.072 billion yuan respectively, and the net profit was 240 million yuan, 433 million yuan and 1.03 billion yuan respectively.
However, after 2023, the performance of Longyi Technology immediately changed its face. In the first half of this year, the company's income and net profit were 3.814 billion yuan and-811 million yuan respectively, compared with 6.01 billion yuan and 613 million yuan respectively in the same period last year.
The performance of Longyi technology has ups and downs, and the main driving force behind it is the company's newly distributed lithium iron phosphate cathode material business. From 2020 to 2022, Longyi Technology's income from this business was 0 yuan, 1.877 billion yuan and 12.242 billion yuan respectively.
Looking back in history, the origin of Longji Technology's great success in the field of lithium iron phosphate cathode materials is that the company was able to gain a foothold in this field through the acquisition of Tianjin Beit Nano and Jiangsu Beit Nano in June 2021. At the same time, thanks to the rapid development of downstream new energy vehicles and energy storage industry, as well as the sharp rise in the price of major raw materials, including lithium phosphate, the company's lithium iron phosphate cathode material business has ushered in blooming.
As the clock is set to 2023, due to the change in the supply and demand situation of lithium iron phosphate cathode materials, the revenue from this business has also declined. In the first half of this year, the contribution income of lithium iron phosphate cathode materials was only 2.852 billion yuan, a sharp drop of more than 40% compared with the same period last year, which in turn dragged down the overall performance of Longyi Science and Technology.
In contrast, the revenue change of Longyi Technology's automotive environmentally friendly fine chemicals is much more stable. During the reporting period, the company's income from the division was 1.846 billion yuan, 2.119 billion yuan, 1.763 billion yuan and 938 million yuan respectively. In addition, a small portion of Longyi's revenue is contributed by other businesses, and the annual revenue of this business hovers around 60 million yuan.
In terms of profit, due to the significant periodicity of the main product lithium iron phosphate cathode materials, the profit trend of Dragon Technology has also shown high volatility in recent years. During the reporting period, the company's gross profit was 589 million yuan, 1.08 billion yuan, 2.433 billion yuan and-241 million yuan respectively, and the corresponding gross profit margin was 30.8%, 26.6%, 17.3% and-6.3%, respectively.
Worries about the growth prospects of the reversal of supply and demand in the industry
If the "change of face" performance in the first half of this year has poured "a pot of cold water" on investors in Dragon Technology, then looking forward to the future of the company's core product lithium iron phosphate cathode material, I am afraid the future is still not optimistic.
From the upstream and downstream relationship, the upstream of lithium iron phosphate cathode material is mainly lithium source, iron source, phosphorus source and other raw materials, while the downstream is used for the preparation of lithium-ion battery, and finally used in new energy vehicles, energy storage and other fields. In recent years, thanks to the increasing demand in multi-terminal areas such as new energy vehicles, communication base stations and electric energy storage, the market demand for lithium iron phosphate materials has increased rapidly.
However, compared with the fast-growing downstream demand, the capacity expansion rate of lithium iron phosphate cathode material industry is no less than that of the industry. At present, in terms of the industry pattern, the global sales of lithium iron phosphate cathode materials reached 1.1 million tons in 2022. Among them, the top five manufacturers account for about 70.5% of the whole market, and the industry concentration is very high.
Although the leading manufacturers have occupied most of the market, perhaps stimulated by the high profits in previous years, lithium iron phosphate cathode material enterprises are still expanding capacity nonstop at this stage. According to third-party estimates, the first five enterprises in 2023 can basically cover the needs of the industry. This means that the current industry supply and demand situation has been reversed. As reflected in the price level, the price of lithium iron phosphate cathode materials has plummeted from about 125000 yuan per ton in 2022 to 94000 yuan per ton in the first half of this year.
The main business has entered a downward cycle, but Longyi Technology still wants to achieve a dual listing of "Atroph". But to impress investors in the Hong Kong stock market, Dragon Technology may need to reverse its current decline.