Good News on Listing | Frost & Sullivan Assists Jiangsu Longpan Technology Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (2465.HK)

Jiangsu Longpan Technology Co., Ltd. (hereinafter referred to as 'Longpan Technology') successfully went public on October 30, 2024. The company plans to issue a total of 100 million shares, of which 90% will be international offerings and 10% will be Hong Kong offerings. The issue price per share is HK$5.5, raising a maximum of HK$700 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company is a major global manufacturer of lithium iron phosphate cathode materials and a well-known manufacturer of fine chemicals for automotive use in Mainland China, benefiting from the continuously developing industry;

   

• The company's lithium iron phosphate cathode material business has a strong customer base, and its automotive fine chemicals business has a wide sales and distribution network;

   

• The company's strong R&D capabilities enable the product portfolio to be competitive and diversified;

   

• The company has an experienced and visionary management team.

According to a report by Frost & Sullivan:

Based on sales volume in 2023, the company is the fourth-largest manufacturer of lithium iron phosphate cathode materials in China and globally, with a global market share of 6.5%;

Based on sales volume in 2023, the company is the third-largest manufacturer of diesel engine exhaust treatment fluids in the Chinese mainland, with a market share of 9.1%;

Based on sales volume in 2023, the company is the third-largest coolant manufacturer in Mainland China, with a market share of 5.8%.

Lithium batteries mainly consist of positive electrode materials, separators, negative electrode materials, and electrolyte. Among them, the positive electrode material plays a dominant role in terms of the battery's energy density and safety. The cost of positive electrode materials accounts for about 55% of the total lithium battery materials. Lithium batteries can be classified into several categories based on the positive electrode material: lithium iron phosphate (LFP) batteries, ternary lithium (NCM) batteries, lithium manganese oxide (LMO) batteries, and lithium cobalt oxide (LCO) batteries. Among them, lithium iron phosphate batteries and ternary lithium batteries are considered the mainstream options for lithium batteries.

The global shipments of lithium batteries have experienced a significant increase, rising from 250.1 GWh in 2019 to 1,226.8 GWh in 2023, with a compound annual growth rate of 48.8%. It is estimated that by 2028, global shipments of lithium batteries will reach 3,680.5 GWh, with a compound annual growth rate of 24.2% from 2024 to 2028. With factors such as increased adoption of renewable energy and robust supply chains, the lithium battery market in Mainland China has also grown rapidly. From 2019 to 2023, the Mainland China market experienced a significant increase, rising from 117.5 GWh to 892.8 GWh, with a compound annual growth rate of 66.0%. It is expected that the market scale of the lithium battery industry in Mainland China will further increase from 1,171.3 GWh in 2024 to 2,804.2 GWh in 2028, with a compound annual growth rate of 24.4%.

Lithium iron phosphate cathode material is the most widely used cathode material in lithium batteries and plays a crucial role in the electrochemical performance of lithium batteries. Compared with other cathode materials (especially ternary lithium), lithium iron phosphate cathode material has many advantages in terms of cycle life, safety characteristics, and temperature resistance. The excellent cycle life of lithium iron phosphate cathode material ensures lasting performance, while its higher safety performance effectively reduces the risk of thermal runaway and short circuits. In addition, the higher temperature tolerance of lithium iron phosphate cathode material enables it to operate reliably in a wider range of environments. Although there are several emerging battery technology approaches such as sodium batteries, these technology approaches are still in the early development stage and there is still a gap between achieving large-scale production and commercialization. For example, sodium batteries still have major functional limitations such as low energy density and safety issues after contact with water. Therefore, in the near future, lithium batteries will continue to dominate the new energy vehicle battery market.

The main raw materials for lithium iron phosphate cathode materials are lithium carbonate and iron phosphate, which are more cost-effective and easier to obtain compared to the raw materials used in ternary lithium materials. In 2023, the global price of lithium iron phosphate cathode materials was about 72,200 RMB per ton, less than half the price of ternary lithium materials. These characteristics make lithium iron phosphate cathode materials the preferred choice for new energy vehicles, energy storage systems, and critical backup power systems. From 2019 to 2023, the market share of lithium iron phosphate cathode materials in the global cathode material industry, calculated by shipments, increased significantly from 14.0% to 57.6%. With the continuous progress of lithium iron phosphate cathode materials, their application fields are expected to further expand in the future.

Source: Frost & Sullivan report

The upstream part of the lithium iron phosphate cathode material industry includes raw material suppliers and production equipment manufacturers. Raw material suppliers play an important role in the supply chain by providing the necessary components (such as lithium carbonate and iron phosphate) required for producing lithium iron phosphate cathode materials. On the other hand, production equipment manufacturers provide the machinery and equipment needed for the manufacturing process of lithium iron phosphate cathode materials. Currently, more and more lithium iron phosphate cathode material manufacturers are expanding into the upstream part of the industry to produce their own raw materials.

The midstream consists of battery cathode material manufacturers that adopt two mainstream manufacturing technologies: solid-phase and liquid-phase methods. Under the liquid-phase method, the elements (i.e., lithium carbonate and iron phosphate) in the finished product are mixed more evenly, resulting in higher consistency but a more complex preparation process. In contrast, manufacturers using the solid-phase method have a technical advantage due to its relative simplicity, efficiency, and scalability, enabling them to effectively expand production scale to meet large downstream demands. The production process using the solid-phase method is simpler (mainly involving raw material mixing, ball milling for uniformity, calcination to form the lithium iron phosphate structure, then crushing and sieving to the required particle size), with a lower equipment density, and is easier to automate than the liquid-phase method that requires dissolving raw materials, co-precipitating precursors, and thoroughly washing and filtering to remove impurities. In addition, by eliminating liquid loss, the solid-phase method produces higher energy efficiency and material utilization rates. As one of the most important parts of the industry value chain, cathode material manufacturers play a pivotal role. They are responsible for producing high-quality lithium iron phosphate cathode materials, ensuring production scale and efficiency, maintaining strict quality control measures, promoting innovation, and effectively managing both ends of the supply chain.

The downstream segment of the lithium iron phosphate cathode material industry involves the utilization of the produced cathode materials. Lithium iron phosphate cathode materials are mainly used in the production of lithium iron phosphate batteries. These batteries are widely used in the new energy vehicle and energy storage system industries. In the new energy vehicle market, lithium iron phosphate batteries provide safe and reliable vehicle energy storage solutions. In the energy storage system market, they can achieve efficient renewable energy storage to address climate change.

Source: Frost & Sullivan report

From 2019 to 2023, the global sales volume of lithium iron phosphate cathode materials increased significantly by a compound annual growth rate of 100.4%. This growth was mainly due to increased demand from the new energy vehicle and energy storage system sectors, advancements in battery technology and thermal management systems, as well as the inherent cost advantage of lithium iron phosphate batteries. Looking ahead, due to strong downstream demand and the cost-effectiveness of lithium iron phosphate batteries, the global lithium iron phosphate cathode materials industry is expected to maintain its growth trend and reach a sales volume of 4,192.0 thousand tons in 2028, with a compound annual growth rate of 18.6% starting from 2024.

In 2023, the Chinese mainland market accounted for approximately 99% of global sales of lithium iron phosphate cathode materials. Most leading lithium iron phosphate cathode material manufacturers are located in the Chinese mainland, driving the global growth trend of the industry. Similar to the global market, sales of lithium iron phosphate cathode materials in the Chinese mainland increased significantly between 2019 and 2023, with a compound annual growth rate of 100.6%. It is expected that more well-known lithium iron phosphate cathode material companies from the Chinese mainland will establish production capacity abroad in the future to expand their overseas market share and reduce transportation costs. By 2028, sales of lithium iron phosphate cathode materials in the Chinese mainland are expected to reach 3,884.0 thousand tons, with a compound annual growth rate starting from 2024 of 17.2%. However, the market share of lithium iron phosphate cathode materials in the Chinese mainland in the global market is expected to decline from 97.1% in 2024 to 92.7% in 2028. This transformation provides opportunities for growth and development in other regions of the world.

Source: Frost & Sullivan report

Overseas expansion drives the international development of lithium battery value chain enterprises

In recent years, as part of its globalization strategy, lithium battery value chain manufacturers have gradually expanded their focus from the Chinese mainland to international markets, aiming to gain a first-mover advantage during the expansion process. Calculated based on sales outside the Chinese mainland, the market share of lithium iron phosphate cathode materials is expected to rise from 2.9% in 2024 to 7.3% in 2028. Among the destinations for overseas expansion, Indonesia has several key advantages, including its complete new energy vehicle industry value chain, favorable investment policies, and advantageous geographical location. Firstly, leading companies in the lithium battery value chain have already formulated detailed investment plans in Indonesia, establishing a comprehensive layout in the country's lithium battery value chain. Specifically, attracted by factors such as rapid market growth, localization incentives, and proximity to raw material sources, several global leading lithium battery manufacturers and new energy vehicle manufacturers have announced plans to establish manufacturing facilities in Indonesia. These major industry participants are expected to invest billions in the coming years to establish integrated production capabilities from upstream mining and raw material manufacturing to midstream battery material supply and downstream lithium battery manufacturing and recycling. Their ambitious expansion strategy and expected capital investment also demonstrate Indonesia's huge market potential as a hub for the electric vehicle ecosystem and the lithium iron phosphate cathode material value chain. The Indonesian government has also successively promulgated policies to promote industry growth by reducing taxes and increasing the local content of new energy vehicles' raw materials. For example, in Presidential Decree No. 55/2019, Indonesia prioritizes the development of its domestic new energy vehicle industry, stipulating that the local content requirement for new energy vehicles produced in Indonesia should reach 40% by 2023, 60% by 2029, and 80% by 2030. In addition, according to Government Regulation No. 74/2021, electric vehicles (a type of new energy vehicle) are exempt from luxury goods sales tax. Law No. 1/2022 stipulates that property transfer fees, ownership fees, and vehicle taxes for new energy vehicles are exempted starting from 2025. Moreover, Indonesia's annual production capacity of lithium iron phosphate batteries only accounts for less than 5% of the demand for new energy vehicle batteries, while Indonesia has proposed to export 200,000 new energy vehicles by 2025 and achieve the goal of having 2.2 million electric vehicles on the road by 2030. The local and overseas growth potential is huge, thus providing market space for the local lithium iron phosphate industry value chain and attracting foreign investment. At the same time, as a raw material supplier and maritime hub connecting the Chinese mainland with other raw material suppliers, Indonesia has multiple advantages, including convenient raw material transportation and lower transportation costs. Therefore, leading companies in the Chinese mainland lithium battery value chain have begun investing overseas (especially in Indonesia) by taking advantage of the above favorable factors. By transferring production operations to Indonesia, lithium iron phosphate cathode material companies headquartered in the Chinese mainland can use the country as a strategic platform to support their globalization strategy.

The upstream expansion of lithium iron phosphate cathode material manufacturers brings stable revenue

Currently, a common trend in the lithium battery value chain is the expansion of lithium iron phosphate cathode material manufacturers into upstream raw material manufacturing. By expanding, lithium iron phosphate cathode material manufacturers aim to achieve stable raw material costs and supply, which is particularly important in recent years with significant price fluctuations. The global price of lithium carbonate has fluctuated significantly, rising from about RMB 71,000 per ton in 2019 to RMB 272,300 per ton in 2023. At the same time, the price of lithium phosphate has also increased from about RMB 12,400 per ton in 2019 to about RMB 14,000 per ton in 2023. Therefore, lithium iron phosphate cathode material manufacturers that can independently produce both lithium carbonate and lithium phosphate can maintain a relatively stable cost range while ensuring the reliability of essential raw material supply. This strategic move is expected to ultimately improve their profitability. In addition, by reducing dependence on external suppliers, lithium iron phosphate cathode material manufacturers can better control supply and demand balance, contributing to the overall safety and stability of enterprises within the industry. In particular, lithium carbonate plays a crucial role because it is a key raw material for producing lithium iron phosphate cathode materials, providing the necessary lithium for electrochemical performance, thereby making lithium iron phosphate batteries highly stable, with long cycle life, and safe. As of 2023, lithium carbonate accounts for more than 80% of raw material costs, making the stable supply of lithium carbonate crucial to lithium iron phosphate cathode material manufacturers. This upstream expansion encourages dynamic cooperation across the entire lithium battery value chain, promoting a more integrated and resilient industry.

Analysis of the Competitive Landscape of Lithium Iron Phosphate Cathode Materials Industry

In 2023, the global sales volume of lithium iron phosphate cathode materials reached 1,660.0 thousand tons. Based on sales volume, the Group has become the fourth largest manufacturer of lithium iron phosphate cathode materials in the world. In 2023, the Group's sales volume reached 108.1 thousand tons, accounting for 6.5% of the entire market. The lithium iron phosphate cathode material market is highly concentrated, with the world's top five manufacturers accounting for about 66.7% of the entire market in 2023. Since the Chinese mainland market accounted for approximately 99% of the global lithium iron phosphate cathode material market in 2023, the world's top five lithium iron phosphate cathode material manufacturers are the same as those in the Chinese mainland. Therefore, based on sales volume, the Group is also the fourth largest manufacturer of lithium iron phosphate cathode materials in the Chinese mainland.

Source: Frost & Sullivan report

Automotive fine chemicals refer to chemicals used for the maintenance and repair of automobiles and their related parts, aiming to improve vehicle performance, extend component life, reduce pollution, and save energy. Automotive fine chemicals mainly include diesel engine exhaust fluid (DEF), automotive lubricants, coolant, and automotive maintenance products.

• Diesel engine exhaust treatment fluid: Diesel engine exhaust treatment fluid converts harmful nitrogen oxides emitted by diesel engines into harmless water vapor and nitrogen, effectively reducing diesel engine emissions. Diesel engine exhaust treatment fluid is a consumable, accounting for an average of 3-5% of diesel consumption.

   

• Automotive lubricants: Lubricants can be divided into industrial, automotive, and other lubricant products. Automotive lubricants (such as diesel engine oil, gasoline engine oil, transmission fluid, and automotive gear oil) belong to automotive fine chemicals due to their environmental advantages, including extending engine life, improving fuel efficiency, saving energy, and ultimately promoting the automotive industry towards a cleaner and more environmentally friendly direction.

   

• Coolant: Coolant plays a crucial role in the vehicle's thermal management system by facilitating efficient heat transfer and precise temperature control. It enhances heat absorption and transfer, enabling the vehicle to operate within the optimal temperature range, thereby improving performance, comfort, and ensuring safety.

   

• Automotive maintenance products: Automotive maintenance products include cleaning, protecting, and maintaining various aspects of a car's appearance and functionality, including windshield washer fluid, gasoline additives, car cleaning wax, air conditioner cleaner, tire cleaner and patches, interior detail products, engine degreaser, etc.

With the expansion of the automotive industry and the increasing demand for sustainable solutions, the global automotive fine chemicals industry (including diesel engine exhaust treatment fluids, automotive lubricants, coolants, and automotive maintenance products) has experienced significant growth. The global vehicle ownership increased from 15.577 million in 2019 to 17.715 million in 2023. With the increase in downstream industry demand, the global market size for diesel engine exhaust treatment fluids calculated by sales volume increased from 770,000 tons in 2019 to 1080,000 tons in 2023, with a compound annual growth rate of 8.8%. In terms of the global automotive lubricants industry, the market size increased from 1.96 million tons in 2019 to 2.27 million tons in 2023, with a compound annual growth rate of 3.7%. The global coolant segment has experienced stable growth, with the market size calculated by sales volume increasing from 530,000 tons in 2019 to 580,000 tons in 2023, with a compound annual growth rate of 2.3%. In addition, the market size of the global automotive maintenance products industry increased from 2.00 million tons in 2019 to 2.23 million tons in 2023, with a compound annual growth rate of 2.7%. With the expected further expansion of the global automotive industry, it is estimated that by 2028, the global vehicle ownership will reach 19.849 million, further driving the growth of the global automotive fine chemicals industry. It is expected that during the period from 2024 to 2028, the compound annual growth rates for diesel engine exhaust treatment fluids, automotive lubricants, coolants, and automotive maintenance products will be 5.2%, 3.0%, 4.1%, and 3.0% respectively.

Source: Frost & Sullivan report

In 2023, the total market scale of diesel engine exhaust treatment fluid industry in Mainland China was calculated at 3,637.2 thousand tons based on sales volume. The three major diesel engine exhaust treatment fluid enterprises in Mainland China accounted for a combined market share of 51.2% based on sales volume. Among all enterprises, our group ranked third with sales volume of approximately 331.4 thousand tons in 2023, accounting for a market share of 9.1% in the diesel engine exhaust treatment fluid industry in Mainland China.

Source: Frost & Sullivan report

In 2023, the total market scale of the coolant industry in Mainland China reached 1,710,000 tons based on sales volume. In terms of sales volume, the top three coolant companies in Mainland China collectively accounted for 26.9% of the market share. Among industry participants, our group ranked third with sales volume of 994,000 tons, accounting for 5.8% of the coolant industry's market share in the same year.

Source: Frost & Sullivan report

Frost & Sullivan has extensive research experience in the battery and raw materials, new energy vehicles, and related industries. It has assisted well-known companies in successfully listing on capital markets. Successful listing cases include: RP Luneng (0666.HK), Guohong Hydrogen Energy (9663.HK), Noco-noco (NASDAQ:NCNC), VinFast (NASDAQ:VFS), GOTION, U Power (NASDAQ:UCAR), NIO Automotive (SGX:NIO), NIO.NYSE, CNPC Clean Energy (1759.HK), Zhongcheng Energy (2337.HK), Xintele Energy (1799.HK), CEC Energy (3996.HK), Chao Wei Power (0951.HK), Tianeng Battery (0819.HK), Huadian Fuxin New Energy (0816.HK), and others.