On May 17, Changyuan Lico announced that it has signed a letter of intent for investment with the government of Fuqing. According to the letter of intent for investment, Changyuan Lico plans to spend RMB 10 billion to build a base for manufacturing advanced materials that are used in high-performance Li-ion batteries. These products include ternary cathode materials, ternary precursors, and LFP cathode materials. Fuqing is a city in China’s Fujian Province.
Changyuan Lico said the proposed project aligns with the company’s long-term strategic aim of expanding its presence in the Li-ion battery market. Once the proposed project is up and running, it will contribute to the company’s core competitiveness and profitability.
Commenting on the scale of the investment, Changyuan Lico said the sources of funding for the project will not be limited to the company’s own cash reserves. The company will also seek bank loans, equity financing, and other methods of obtaining capital. The specific details regarding the financing of this project have yet to be determined, and there are uncertainties as to whether the entire RMB 10 billion can be raised.
It is worth mentioning that the proposed project in Fuqing is the first manufacturing base that Changyuan Lico plans to build outside of China’s Hunan Province, where it is headquartered. Currently, the company possesses three manufacturing bases respectively located in Lugu, Tongguan, and the Hi-Tech Industrial Zone. These sites are all within Hunan.
Established in 2002, Changyuan Lico is managed by the state-owned China Minetals Corporation. Its main product offerings encompass a wide range of precursors and cathode materials, including ternary cathodes, LFP, LCO, and cathodes for NiMH batteries. The company has already entered the supply chains of the major Chinese battery manufacturers such as CATL, BYD, and EVE.
Currently, Changyuan Lico has a total of around 120,000 tons per year of production capacity for ternary cathode materials. This amount includes production lines that are either in operation or under construction. The distribution of this amount by site is as follow: the Ligu base has 10,000 tons per year, the Tongguan base has 30,000 tons per year, and the Hi-Tech Industrial Zone has 80,000 tons per year. Some of the newly built production lines entered operation in 1Q23 and are gradually ramping up.
Turning to LFP-related products, the company is currently sending them to potential customers for qualification. Shipments of these products are expected to commence in 2Q23.
Regarding capacity expansion activities, Changyuan Lico raised RMB 3.25 billion through bond conversion in 2022. The proceeds from this fundraising round are to be used to finance the establishment of a 40,000-ton-per-year production capacity for cathode materials and a 60,000-ton-per-year production capacity for LFP. Additionally, on March 27 of this year, Changyuan signed a memorandum of cooperation with Axens Group, a subsidiary of the French research agency IFPEN. Together, they intend to establish a base for manufacturing cathode materials in Europe.
In terms of financial performance, Changyuan’s revenue has been growing rapidly in the past two years thanks to the continuing boom in the NEV market. The company’s realized revenues for 2021 and 2022 came to RMB 6.841 billion and RMB 17.975 respectively. The YoY growth rates for the company’s revenues were also huge: 240.25% for 2021 and 162.75% for 2022. As for the company’s profit attributable to the parent company, it soared by 538.17% YoY to RMB 701 million for 2021. The figure came to RMB 1.489 billion for 2022, also reflecting a YoY growth rate of 112.59%.
However, the company’s performance so far this year has been impacted by weakening demand and falling prices for LFP. According to the company’s earnings report for 1Q23, the realized revenue for the reporting period dropped by 42.99% YoY to RMB 1.934 billion. The company’s net profit dropped by 99.69% YoY to RMB 929,400. Furthermore, after deducting the non-recurring items, the company incurred a net loss of RMB 21.14 million, thus showing a performance decline of 107.62%.
This article is a translation of a Chinese article posted by Marry at TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.