(Image is generated by AI)
March 11,Fulin Precision(300432.SZ) stock continued its previous day’s rise, up 2.93%, closing at 23.55 yuan per share, continuing to set a new high since the “924” market last year. The catalysis of the continued rise in stock prices comes from the news, the company’s announcement the night before andCATL(300750.SZ) reached strategic cooperation.
According to the announcement, Fulin Precision and its holding subsidiary Jiangxi Shenghua New Materials Co., Ltd. (hereinafter referred to as “Jiangxi Shenghua”) signed a “Strategic Cooperation Agreement” with CATL and introduced CATL as a strategic investment to increase capital and expand shares in Jiangxi Shenghua.
Titanium Media APP noticed that Fulin Precision and CATL had actually cooperated long ago. With the support of the latter’s order, the company’s new energy lithium battery positive electrode material business was able to regain half of its performance. Moreover, CATL has increased its capital in Jiangxi Shenghua. As early as 2021 and 2022, CATL made strategic investments in Jiangxi Shenghua, and later sold its shares back to Fulin Precision in December last year. Nowadays, the three-party strategic cooperation has extended from lithium iron phosphate to popular intelligencerobotOn the one hand, it shows that the company’s “binding” to CATL has deepened, and on the other hand, it highlights the company’s urgency to find a new growth curve.
CATL invests in Jiangxi Shenghua for the second time as a strategic investment
Fulin Precision’s main business is the research, development, production and sales of automotive engine parts, new energy vehicle intelligent electronic control and new energy lithium battery positive electrode materials. Its controlling subsidiary Jiangxi Shenghua is mainly responsible for the new energy lithium battery positive electrode material business segment. Speaking of cooperation between the three, we have to start with the history of sublimation in Jiangxi.
In July 2015, Jiangxi Shenghua was established, and its founding shareholder was Hunan Shenghua Technology Co., Ltd. (hereinafter referred to as “Senhua Technology”). In 2016, Fulin Precision, which has been listed for only one year, purchased 100% of the equity of Shenghua Technology held by shareholders such as Peng Peng, Peng Shu, and Peng Zhengguo through issuing shares and paying cash. The transaction price is 2.1 billion yuan, thereby transforming into the new energy lithium battery industry. As a wholly-owned subsidiary of Shenghua Technology, Jiangxi Shenghua has thus become a wholly-owned subsidiary of Fulin Seiko. At that time, the first batch of production lines in Jiangxi, the first batch of production lines began to be debugged, and had not yet been officially produced and operated, with a registered capital of only 20 million yuan.
After being included in Fulin Precision, Shenghua Technology once led the new energy lithium battery positive electrode material business and became the pillar of the company’s performance. However, due to poor management in 2018 and 2019, Fulin Precision suffered huge losses in 2018, and the performance contribution of the new energy lithium battery sector returned to the small base. The related performance compensation is another story.
However, the company has a lot of support for Jiangxi Sublimation. In December 2019, Fulin Precision announced that it plans to convert its 600 million yuan debt claim in Jiangxi Shenghua (including 327.16 million yuan of investment funds for the company’s major asset restructuring fundraising projects in 2016 and 272.84 million yuan of other debt claims) into its long-term equity investment. Jiangxi Shenghua’s registered capital increased to 620 million yuan, Fulin Precision directly held 96.77% of Jiangxi Shenghua’s equity, and indirectly held 3.23% of the shares through Shenghua Technology.
In January 2021, Fulin Precision established a capital link with CATL for the first time. The company, Jiangxi Shenghua, CATL and Changjiang Chendao (Hubei) New Energy Industry Investment Partnership (Limited Partnership) (hereinafter referred to as “Changjiang Chendao”) signed an investment agreement to jointly increase capital in Jiangxi Shenghua. Jiangxi Shenghua introduced strategic investors through capital increase. At this time, Jiangxi Shenghua’s net assets were valuated at 220 million yuan. On August 1 of the same year, the first phase of delivery was completed, with Fulin Precision, CATL and Changjiang Chendao each increasing their capital by 272 million yuan, 20 million yuan and 164 million yuan; in February 2022, CATL completed another 144 million yuan in capital increase, holding a total of 164 million yuan in registered capital of Jiangxi Shenghua, with a shareholding ratio of 20%.
However, two and a half years later, in August 2024, Fulin Precision announced that it plans to repurchase 20% of the shares of Jiangxi Shenghua held by CATL and Changjiang Chendao, respectively. The repurchase consideration is RMB 195.9465 million and RMB 193.4930 million, respectively, and the price of repurchase of CATL’s equity is RMB 1.19/registered capital.
A simple calculation shows that CATL’s first battle to invest in Jiangxi Sublimation, earning a small profit of 31.9465 million yuan, with an investment return of 19.48%.
It is worth noting that although CATL sublimated and withdrawn its investment from Jiangxi, the cooperation between the two parties has not ended. On the same day, the two parties signed a “Business Cooperation Agreement”, and CATL agreed to pay a certain amount of advance payment to Jiangxi Shenghua to support the construction of the Jiangxi base; Jiangxi Shenghua promised to complete the construction of the Jiangxi base on schedule and achieve an annual production capacity of 75,000 tons of lithium iron phosphate positive electrode material that meets Party A’s production requirements. Jiangxi Shenghua also promised to purchase at least 140,000 tons from Jiangxi Shenghua every year during the period of 2025-2027.
By the way, at the end of December last year, Fulin Precision once again transferred its 734.5 million yuan debt claim for Jiangxi Sublimation to increase its capital, with the capital increase price of 1.13 yuan/registered capital, increasing Jiangxi Sublimation registered capital by 650 million yuan.
Just half a year later, Fulin Precision and Jiangxi Sublimation and CATL went further. Not only did the three parties officially announce that they signed a strategic cooperation agreement, it said that it would carry out long-term and sustainable in-depth cooperation in the research and development of lithium iron phosphate material products, production capacity investment and construction, international expansion, supply chain and capital, and further expand cooperation opportunities for incremental components and joints in innovative fields such as automobiles and intelligent robots.
CATL once again increased its capital in Jiangxi Shenghua as a strategic investor, intending to subscribe to Jiangxi Shenghua’s new registered capital of 338.98 million yuan for 400 million yuan, and obtain 18.7387% of the equity of Jiangxi Shenghua based on a completely diluted basis after the completion of the transaction. The transaction price is 118 million yuan/registered capital. The capital increase will be used only as operating funds to expand the company’s main business, and Jiangxi Sublimation promises a timetable for new factories and expansion plans.
(Jiangxi Sublimation promised to build new factories and production expansion plans, source: Fulin Precision Announcement)
Betting on the Robot Track
After binding to CATL, Jiangxi’s sublimated production capacity and revenue scale expanded rapidly. In 2022, 2023 and 2024 H1, Jiangxi Shenghua achieved revenue of 4.879 billion yuan, 2.808 billion yuan and 1.95 billion yuan, and net profit of 288 million yuan, -1.053 billion yuan and 80.1229 million yuan respectively.
With the support of Jiangxi’s sublimated performance, the lithium battery positive electrode material sector has become the main contributor to Fulinjing Industrial’s performance since 2022. In 2022, 2023 and 2024 H1, the company’s revenue from automotive parts and accessories manufacturing was 2.469 billion yuan, 2.953 billion yuan and 1.621 billion yuan, respectively, and the revenue from lithium battery positive electrode materials was 4.878 billion yuan, 2.808 billion yuan and 1.949 billion yuan, respectively.
However, lithium batteries are a cyclical industry, and the supply and demand imbalance last year directly led to collective losses in the positive electrode material link of lithium batteries. The decline in revenue and losses of Jiangxi Shenghua also brought about the performance of Bengfu Lin Precision in 2023. The company achieved revenue of 5.761 billion yuan, a year-on-year decrease of 21.58%; the net profit attributable to shareholders was 543 million yuan, a year-on-year decrease of 184.12%.
(Changes in Fulinjing Industrial Performance, Source: Wind)
The better news is that the company is expected to turn losses into profits in 2024. Previous performance forecasts show that profits are expected in 2024370 million yuan to 450 million yuan.
The company said that the operating income and profits of the automotive parts business have steadily grown, among which the production and sales of new energy parts business have maintained rapid growth, and the market share of incremental parts business has steadily increased. The thermal management system and new energy electric drive system business of the intelligent electronic control industry have entered a period of rapid growth, and CDC solenoid valve products have begun to increase in scale; in terms of lithium battery positive electrode materials business, with the rapid increase in product differentiation and high-end demand for terminal market customers, the company’s lithium iron phosphate positive electrode materials have highlighted their differentiated competitive advantages with excellent technical performance indicators, with the shipment volume significantly increased compared with the same period last year, operating income increased significantly, and profitability has improved significantly.
Under the cyclical fluctuations in the lithium battery positive electrode material sector business, Fulin Precision has turned to extend the original automotive parts industry. Since last year, it has frequently announced robot-related actions and entered the robot track.(See the previous article of Titanium Media APP for detailsJust turned losses into profits in 2024, Fulin Seiko began to bet on the robot track》)
Fulin Precision said that the robot industry is an extension of the company’s application field of automotive precision manufacturing parts products. The company will actively expand and grasp the opportunities of the intelligent robot industry, and will continue to closely combine technology and product innovation with the technological innovation upgrade trends and market demands of the industry’s leading customers to meet customers and market demands.(This article was first published on Titanium Media APP, author | Su Qitao)
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