Zeng Yuqun secures the world's largest IPO this year

Author | Zhou Zhiyu

Editor | Zhang Xiaoling

Starting from the small city of Ningde in Fujian, it took over a decade for CATL Chairman Zeng Yuqun to conquer one-third of the global power battery market; and from being the "king of the ChiNext" in A-shares to creating the largest IPO in the world this year, he achieved this in less than seven years.

On May 20, the gong of the Hong Kong Stock Exchange pierced through the trading hall, announcing that the global power battery giant CATL officially landed on the Hong Kong stock market. Standing beside Zeng Yuqun was the Financial Secretary of the Hong Kong Special Administrative Region, Paul Chan, reflecting the importance placed on CATL's listing in Hong Kong.

Whether it was completing the overseas issuance filing in just 25 days, passing the Hong Kong Stock Exchange hearing in two months, or completing the listing in only 98 days, CATL's IPO carried more significance.

As Paul Chan stated, CATL's listing on the Hong Kong Stock Exchange reflects the confidence of enterprises and investors in the Hong Kong stock market.

CATL also raised a net amount of approximately HKD 35.3 billion from the listing, becoming the largest IPO in the world this year.

Under the spotlight of the Hong Kong Stock Exchange, CATL Chairman Zeng Yuqun painted an ambitious blueprint for the global capital market: a transformation from a battery component manufacturer to a zero-carbon technology company, from a local player in China to a leader in the global new energy revolution. Behind this transformation is CATL's insight into the reshaping of the global energy structure and its strategic bet on the trillion-level zero-carbon economy track.

Zeng Yuqun stated, "Listing on the Hong Kong Stock Exchange means we are more broadly integrating into the global capital market, and it is also a new starting point for us to promote the global zero-carbon economy."

The key to this new journey lies in whether it can transform technological advantages into ecological dominance and establish new rules in areas such as battery swapping networks, energy storage standards, and industrial collaboration. CATL also hopes to define the game rules for global energy transition and seize the high ground in the new round of industrial revolution.

Booming

The level of excitement surrounding CATL's listing on the Hong Kong Stock Exchange is rare in the Chinese capital market.

As of the close on May 21, CATL's H-shares were priced at HKD 337.4 per share, up 28.29% from the issue price, with a total market capitalization of HKD 1.53 trillion. Excluding a few banking giants and China Mobile, only Tencent and Alibaba have a market capitalization exceeding that of CATL, followed closely by Xiaomi and BYD.

Moreover, despite listing at a low discount rate, CATL has already become one of the few H/A premium companies in the Hong Kong stock market, demonstrating the recognition of funds for CATL. In the past, only a few stocks like China Merchants Bank and Midea Group exhibited H/A premium phenomena.

Wang Zonghao, head of China equity strategy research at UBS Investment Bank, analyzed on May 21 that the emergence of H/A premiums for certain stocks indicates they are viewed as quality core holdings by overseas investors. Additionally, the liquidity of stocks listed in Hong Kong is higher than that of A-shares.

The performance of CATL on its first day of trading in Hong Kong exceeded investors' expectations.

Although the profit-making effect of IPOs has returned this year, significantly better than last year, creating a favorable market atmosphere for CATL's listing, many retail investors were still hesitant about whether to subscribe to CATL's IPO Data shows that in the IPO of CATL, the subscription amount for the Hong Kong public offering exceeded 151 times, with a subscription amount exceeding HKD 350 billion. However, compared to this year's popular Mijiu Ice City (subscription multiple of 5,258 times, subscription amount of HKD 1.84 trillion) and Bruker (subscription multiple exceeding 6,000 times, subscription amount of HKD 877.496 billion), the retail subscription amount for CATL is not high.

As a result, many individual investors have low expectations for CATL's performance after its listing, choosing to sell during the gray market phase (with an approximate increase of 8%), missing out on its significant rise after listing.

This is partly related to the fundraising structure of CATL this time. CATL applied for an exemption from the clawback mechanism, and did not conduct an excess clawback for the retail subscription portion, fixing the retail subscription ratio at 7.5%. More shares were left for institutional investors.

It can be seen that during the international placement phase, CATL received over 30 times subscription, with the final number of shares for the international offering being 125 million shares, accounting for about 92.5% of the total offering.

An investment banker close to CATL's Hong Kong IPO stated that the purpose of this setup is for CATL to hope for more long-term investors to be deeply bound to it.

Of course, this structure means that although CATL's overall fundraising amount is considerable, most of the shares are locked up. An institutional investor stated that the actual circulating stocks of CATL at the initial stage of its Hong Kong listing are relatively few, and the current liquidity in the Hong Kong stock market is abundant, leading to speculation in the short term after CATL's Hong Kong listing.

Previously, CATL also disclosed that 23 institutions acted as cornerstone investors, securing about USD 2.628 billion of the fundraising amount. Among them, Sinopec (Hong Kong) Limited and KIA (Kuwait Investment Authority) received the largest shares, both amounting to USD 500 million; Hillhouse Capital invested USD 200 million through its subsidiary, and well-known institutions such as Gao Yi Asset, UBS Asset Management, and Oaktree Capital were also prominently listed.

CATL stated that allocating more offering shares to professional and institutional investors is beneficial for establishing a solid and balanced shareholder base, maintaining the company's corporate governance level, ensuring a balance between long-term holdings and short-term liquidity, and enhancing the stability of the H-share secondary market.

Wang Zonghao stated that the recent performance of newly listed companies in the Hong Kong stock market reflects some overseas investors' interest and recognition of China's core assets. In the future, more long-term funds will need to flow back to the Chinese stock market.

As Chen Maobo said, as the largest IPO fundraising case globally this year, CATL has successfully attracted global attention and has become a focal point for global investors.

Breakthrough

CATL has repeatedly created "capital myths" in the capital market.

With the support of numerous well-known institutions, CATL was listed on the Shenzhen Stock Exchange in 2018, breaking the highest fundraising record at that time for the ChiNext.

Subsequently, riding the wave of new energy, CATL became the first company on the ChiNext to exceed a market value of one trillion in May 2021.

However, in the past three years, the A-share market's valuation of CATL has once hit a bottleneck. Although its revenue in 2024 is expected to reach RMB 362 billion, with net profit exceeding RMB 50 billion, due to factors such as fluctuations in lithium carbonate prices and intensified competition in domestic power batteries, the A-share stock price has fallen more than 60% from its peak in 2021 and is still about 26% lower than its peak period The price-to-earnings ratio has fallen from a peak of 100 times to the industry average level. Behind this phenomenon is the capital market's repricing of CATL.

Through CATL's financial reports over the past few years, especially the data from its domestic business, it can be seen that the current power market no longer relies solely on rapid expansion of market size for revenue growth, but must maintain profits through refined management and cost optimization in a saturated market. This also marks the transition of the power battery industry from "land grabbing" to "meticulous cultivation," posing a severe test for all participants.

To break through, it is necessary to overcome the growth bottleneck of power batteries, and CATL also needs to shake off the current market's cyclical pricing of its traditional manufacturing industry.

Zeng Yuqun's speech at the Hong Kong stock listing ceremony conveyed a clear signal of transformation: CATL is not just a battery component manufacturer, but also a provider of system solutions, and is committed to becoming a zero-carbon technology company.

As "net zero emissions" has become a global consensus, the zero-carbon economy is rising at an astonishing speed. Global zero-carbon transportation, global zero-carbon electricity, and the new energy transformation of global industries are three trillion-dollar market new blue oceans that CATL is targeting as its next "main battlefield."

As a "zero-carbon technology company," CATL's core business is no longer just battery production, but revolves around the zero-carbon goal of "replacing traditional fossil fuel-based fixed and mobile energy systems with efficient power systems using advanced batteries and renewable energy such as wind, solar, and hydro."

From "batteries" to "full-scenario solutions," the development of global zero-carbon transportation has already entered the "deep water zone." This is no longer simply about replacing fuel vehicles with electric vehicles, but about leading with technological innovation to solve user pain points and achieve low-carbon development across all scenarios.

The World Economic Forum released a report last year estimating that to achieve sustainable transportation goals by 2050, global total investment will exceed $16 trillion. According to data from Gaogong Industry Research, global demand for new energy vehicles is expected to grow from 17.7 million units in 2024 to 55.6 million units by 2030, with a compound annual growth rate of 21% from 2024 to 2030.

The promotion and application of battery swapping models will further enhance the economics of new energy vehicles, especially helping to expand penetration for vehicles priced below 150,000. At the listing ceremony, Zeng Yuqun repeatedly mentioned battery swapping. In his view, the global transportation system is being restructured, and the new energy vehicle and battery swapping ecosystem is entering an explosive phase. Previously, his view was that by 2030, battery swapping, home charging, and public charging stations would each account for one-third of the market.

If zero-carbon transportation is "mobile energy," then zero-carbon electricity is the "fixed cornerstone." Global zero-carbon electricity has moved from the stage of "whether to do it" to "how fast to do it."

CATL's deep cultivation in the energy storage field has made it an important force on the "fast track" of promoting global zero-carbon electricity transformation. CATL's energy storage battery shipments have ranked first globally for four consecutive years, with business coverage in 52 countries and regions worldwide. In 2024, its energy storage battery business gross margin is expected to rise to 26.8%, 2.9 percentage points higher than that of power batteries, becoming its second-largest growth driver According to investors, CATL has expressed optimism about the data center and energy storage demand in Australia and the Middle East during a communication meeting, believing that this will be a high-quality incremental market in the future. It has also secured a record 19GWh energy storage order in the UAE.

CATL's new story is not limited to transportation and electricity but extends to the "new energy transformation" of global traditional industries. The International Energy Agency predicts that starting from 2030, global investment will reach USD 4.5 trillion annually to achieve "net zero emissions." Among them, promoting the green transformation of traditional high-energy-consuming industries such as steel, cement, and chemicals is a key part of achieving zero carbon goals.

Starting this year, CATL has successively collaborated with companies such as DHL Group, Liaoning Fangda Group, and Moutai Group, as well as various local governments, to promote the new energy transformation of traditional industries like steel, cement, and chemicals, and to explore the implementation of integrated zero-carbon solutions. This "system-level solution" not only provides a path for the upgrading of traditional industries but also opens up new revenue growth points for CATL.

From zero-carbon transportation to zero-carbon electricity, from industrial transformation to global layout, CATL intends to redefine its boundaries through this.

Voyage

When CATL's Hong Kong stock listing bell rang at the Hong Kong Stock Exchange, it was not only a capital feast but also a declaration of the "going global" strategy of China's new energy industry.

From power batteries to complete vehicle manufacturing, from photovoltaic components to energy storage systems, Chinese companies' competitiveness has already permeated every link of the global industrial chain. Now, this "voyage" is no longer limited to capacity output but is leveraging "technology definition," "ecosystem construction," and "capital empowerment" as pivot points to drive the wave of global energy transformation.

CATL's IPO in Hong Kong is a microcosm of this "going global" tide. The vast majority of the funds raised will be directed towards the construction of a battery factory in Hungary, clearly indicating its determination for overseas capacity expansion. This is not only to cope with fierce domestic competition but also to become a "pioneer of the global zero-carbon economy" under the trend of the global new energy revolution.

CATL has stated that it will accelerate the construction of the Hungarian factory, the joint venture factory in Spain with Stellantis, and the industrial chain project in Indonesia, further improving its global production network and enhancing local supply capabilities to respond more flexibly to global market demands.

In addition, it will continue to deepen cooperation with customers through the LRS model (Licence, Royalty, Service).

Looking at the entire Chinese new energy vehicle industry chain, this wave of "going global" has already surged. Chinese new energy vehicle brands such as BYD, Geely, NIO, and XPeng are actively selling products to emerging markets in Southeast Asia and the Middle East, and are attempting to enter the high-end European market.

The Middle East, with its strong demand for new energy transformation and the substantial "cash capability" of its consortiums, has become a "hotcake" for China's new forces in car manufacturing.

Whether it is NIO receiving strategic investment from the Abu Dhabi sovereign wealth fund CYVN or Pony.ai obtaining investment from Saudi Arabia's NEOM, it confirms the overseas capital's preference for Chinese new energy technology and the trend of Chinese companies leveraging overseas capital to accelerate their global layout However, the global chess game is not smooth sailing. As Chinese new energy vehicle and battery companies venture abroad, the efficiency advantages and ecological environment that once worked effectively domestically are facing numerous challenges, and it can even be said that a complex situation of "barriers" and "undercurrents" is intertwined.

The uncertainty of geopolitical factors has brought more variables to the overseas expansion of China's automotive industry chain. CATL has already established a foothold in the European market, with a market share of 43% in the first two months of this year, an increase of 8 percentage points year-on-year, and 13 percentage points higher than the second place; however, the development in the U.S. market faces many uncertainties. Several investors familiar with CATL have stated that if it can further expand into the U.S. market, CATL's valuation could be further enhanced.

Next, CATL, which successfully listed on the Hong Kong Stock Exchange, hopes to leverage international capital to further expand in overseas markets. Wall Street Insights has learned that CATL has established a headquarters and research center in Hong Kong, focusing on research and development, business management coordination, and capital operations.

Hu Zhihe, President of UBS China and Chairman of UBS Securities, pointed out that Hong Kong has become one of the preferred locations for Chinese companies to list and raise funds. Behind this trend is not only the continuous deepening of the "going out" strategy of enterprises but also the ongoing optimization of Hong Kong's listing policies and multiple factors that jointly promote the A+H model into a new upward cycle.

CATL will also become a model for attracting global capital's recognition of China's new energy story, marking the beginning of Chinese new energy companies participating in global competition as "rule-makers," and indicating that the valuation logic of China's capital market for hard tech companies is undergoing profound changes.

Zeng Yuqun said, "The zero-carbon era belongs to everyone." In this era of transformation, the role of Chinese enterprises is destined to become a key variable in the global energy transition.

Just like the navigators of the Age of Discovery, Chinese new energy companies are standing at a new starting point. Their destination is the stars and the sea, and their journey has just begun