Is Tinci Materials limping to a Hong Kong IPO?

China’s securities regulator has given the green light to the battery materials maker’s Hong Kong listing application, but only after a year of scrutiny

Key Takeaways:

• Tinci Materials has been approved by China’s securities regulator to list in Hong Kong, reporting a sharp decline in profitability from the first quarter to the second
• The regulator asked for more details after the battery materials maker filed its first listing application a year ago, before giving its consent last month

By Edith Terry

The road to a Hong Kong IPO has been anything but smooth for Shenzhen-listed Guangzhou Tinci Materials Technology Co. Ltd. (002709.SZ), the world’s top maker of materials for electric vehicle (EV) batteries. The deal could be quite large, potentially raising $1 billion or more, which may have made regulators more cautious in granting approval.

Last October, the China Securities Regulatory Commission (CSRC) asked for more details a month after Tianci first applied for the Hong Kong listing.  A year later, in an announcement dated Aug. 18 but published last Friday, the regulator finally approved the listing plan, with Tianci aiming to sell about 413 million shares in Hong Kong.

The lengthy review is just the latest bump in the road to Tianci’s Hong Kong listing, as the company’s own profitability showed signs of deteriorating this year amid growing signs of oversupply in China’s fast-growing EV battery sector.  

Despite all those challenges, investors in the company’s Shenzhen-listed shares reacted with guarded enthusiasm to the CSRC approval, bidding Tinci’s stock up by 2.4% over the next three trading days after the announcement last week.

That gave Tianci, whose shares are still down nearly 30% this year, a market cap of about 67 billion yuan ($10 billion) and a price to earnings (P/E) ratio of 17. By comparison, shares of peer Capchem Technology Co (300037.SZ) have risen by over 40% this year, giving it a P/E ratio of 36 despite its smaller size.

Tianci last submitted a publicly available prospectus for the Hong Kong IPO in March, and has yet to submit a new public document to the Hong Kong Stock Exchange following the CSRC approval. But it may have submitted an updated prospectus under a recent rule change that allows some companies to make confidential filings.

Market leader

With roughly 36% of the global market for the electrolytes that are a key component in lithium-ion batteries, Tinci has a commanding position in the EV supply chain. In its March listing document, the company pointed out it is “proactively positioned” in the advanced materials supply chain not only for intelligent driving, but also other emerging areas like low-altitude aircraft and AI-related thermal management.

That said, its profit and revenues are quite variable, fluctuating with a battery market that is fast exhibiting signs of oversupply following a rapid buildup in capacity. Reflecting that, Shenzhen-listed shares of leading EV battery maker CATL fell 10% over two days earlier this week, their steepest decline in over a year, amid the latest signals that the company may be preparing to scale back its production.

Tinci has lots riding on the EV battery market. It was the world’s top electrolyte supplier for lithium-ion batteries last year, the ninth consecutive year in that position. It supplied eight of the world’s 10 top battery manufacturers, all top 10 energy storage system (ESS) battery makers, and nine out of the top 10 consumer battery manufacturers.

Its financials reflect its leading position, though they’ve been as bumpy as the road to its Hong Kong listing. Its profit tumbled 74.4% in 2024 to 483.9 million yuan from 1.89 billion in 2023, thanks to increased competition that led to a slump in lithium battery material prices. Its revenue dropped by 18.7% that year to 12.52 billion yuan from 15.4 billion yuan the year before.

Both its revenue and profit rebounded last year, the former up by 33% to 16.7 billion yuan, and the latter nearly tripling to 1.36 billion yuan. The company’s revenue continued to rebound this year, growing 91% in the first quarter year-on-year and by an even stronger 127% in the second. But its profit sputtered amid falling prices, rising by just 5.2% in the second quarter after a more than 10-fold increase in the first.

Booming EV market

The strong revenue gains come on the back of a global boom for EV sales. The International Energy Agency predicts that 23 million electric cars will be sold in 2026, representing 29% of all car sales. Robust sales in emerging markets this year have counterbalanced weak sales in China and North America, with Southeast Asia among the growth leaders.

Tinci leads in a global electrolyte market worth an estimated at $15.84 billion this year, according to Mordor Intelligence. The company has a current capacity of 860,000 tons of lithium battery materials annually, and is adding another 200,000 tons over the next two years in the U.S. state of Texas, with another 150,000 tons in Morocco.

The company has also been moving beyond battery materials into specialty chemicals for personal care. But at 686 million yuan in the first half of this year, the segment still represented just 4.7% of its revenue for the period. Over the same period, revenue from its core lithium-ion battery materials rose 117.2% year-over-year to 13.69 billion yuan, accounting for 93% of the total.

Both the CSRC and Hong Kong’s Securities and Futures Commission (SFC), as well as the listing committee of the Hong Kong Stock Exchange, have been putting more pressure on listing candidates and their underwriters recently to improve their disclosure quality, amid one of Hong Kong’s strongest IPO markets in years. That may partly explain why Tianci’s listing took so long to get the CSRC’s approval, despite the prestige of having big names like JPMorgan and Citic Securities among its joint sponsors.

The CSRC recently asked nine Chinese companies seeking Hong Kong listings to provide additional information on their shareholding structures and litigation, while the SFC recently suspended shares of biotech firm Cloudbreak Pharma over concerns about IPO manipulation.

With some 500 applications now on the Hong Kong Stock Exchange’s website, and HK$651 billion ($97 billion) in funds raised from IPOs and secondary listings in the first eight months of the year, caution may be warranted. At the same time, the Stock Exchange launched its biggest listing reforms in July in nearly a decade, reducing financial and market capitalization thresholds for companies with weighted voting rights and introducing confidential listing applications.

It’s possible Tinci took advantage of the new procedures to file an updated prospectus confidentially, giving the exchange time to make sure the document is not only up to date but meets its criteria for high quality. “Regulators care more about bringing in high-quality companies with real investment value than about simply racking up the number of listed companies,” Hang Wang, chief representative in Beijing of international law firm Baker McKenzie told the South China Morning Post in a recent interview.

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