In recent weeks, a new unicorn has made its entrance to the Hong Kong Stock Exchange (HKEX), with Guangdong Jinsheng New Energy Co., Ltd(hereafter referred to as "Jinsheng New Energy") launching its initial endeavor to engage with the marketThis bold move marks a significant shift as the company, well-known for its advanced lithium battery recycling technology, previously aimed to list in the A-share market but pivoted towards HKEX after an aborted attempt in August of this year.
The next few years are poised to be a golden period for the lithium battery recycling industry, especially for a company like Jinsheng New Energy, which has faced financial strains and challenges to its growthListing in HKEX presents an opportunity for the company to bolster its finances and expand production capacity, aligning with its long-term strategic interests.
Founded in 2010, Jinsheng New Energy has quickly risen to prominence as a comprehensive lithium battery recycling solution provider
The company specializes in recycling mainstream battery chemistries, including ternary lithium batteries and lithium iron phosphate batteries, showcasing its ability to address the growing demand for effective battery waste management.
In just over a decade, Jinsheng has escalated to the forefront of the global industry, earning recognition as the world’s second-largest entity in lithium battery recycling and repurposing, while reigning as the largest third-party recycling providerValued at over 10 billion RMB, Jinsheng earned the 680th spot in the 2024 Hurun Global Unicorn List with an impressive valuation of 12 billion RMB.
However, recent performance data reveals a sudden downturn in the company's fortunes due to an imbalance in supply and demand within the industry and a significant drop in product prices
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The company's prospects fell sharply in 2023, transitioning from stellar growth into losses.
According to their prospectus, 2022 was a banner year for Jinsheng, with rising product volumes and prices contributing to revenues and profits soaring by approximately 156% and 117%, reaching 2.905 billion RMB and 151 million RMB, respectivelyHowever, in 2023, revenues plummeted to 2.892 billion RMB, resulting in a loss of 473 million RMB—a stark contrast to the prior year.
By the first half of 2024, this downward trajectory continued with revenues further declining to 995 million RMB—35% less than the previous year—alongside significant losses amounting to 147 million RMBThis unfortunate trend reflects a broader issue within China's lithium carbonate market, which has faced an oversupply situation coupled with waning demand in the lithium battery sector.
Lithium prices, which peaked in November 2022 at over 560,000 RMB per ton, have since plunged dramatically, hitting lows of approximately 75,600 RMB per ton by December 2023. According to forecasts by Frost & Sullivan, the average price of lithium carbonate is expected to drop by over 60%, reaching about 82,900 RMB per ton in 2024.
Against this tumultuous backdrop, Jinsheng has not been spared
Although its product sales increased in 2023, the average prices experienced significant declines, and the first half of 2024 saw continued drops in product pricing alongside sluggish sales growth, resulting in the company facing a slowdown after years of rapid expansion.
Since 2021, Jinsheng has raised over 1.3 billion RMB from prestigious investment firms, including China International Capital Corporation, Fosun, and Guangzhou Automobile GroupYet, mounting investment pressures coupled with declining revenue are placing considerable strain on the company's finances.
By the end of June this year, the company's cash and cash equivalents had dwindled to only 39.45 million RMB, while its current liabilities surpassed 1.5 billion RMB, leading to a precarious financial situation for Jinsheng New Energy.
Despite the hardships, there might still be a silver lining on the horizon
Prior to the irrational expansion of the power battery industry, Jinsheng benefitted from favorable market conditions; however, the recent dramatic changes in the industry landscape have caused a sudden halt to its previously projected earnings growth.
The key question is whether Jinsheng’s operating environment can transform as predicted into a “golden” opportunityWill the future trajectory of the industry enable it to resume its path of rapid growth?
The lithium battery recycling industry operates on a different time frame for growth, primarily hinging on the retirement of lithium-ion batteriesGenerally, the lifespan of electric vehicle batteries ranges between five to eight years, and sales of new energy vehicles in China began accelerating significantly from 2018 onwards
Consequently, the coming years will see a surge in the volume of batteries reaching the end of their life cycle.
Frost & Sullivan estimates that by 2030, the overall discarded quantity of power batteries in China will hit 3.0916 million tons, with a robust compound annual growth rate of 42.5% between 2023 and 2030. This influx underscores the market’s potential, driven particularly by an unstoppable wave of retired lithium batteries.
The growing recycling market is further empowered by factors such as an anticipated shortage in raw material supply and favorable policy developments incentivizing recycling practices.
According to Frost & Sullivan’s projections, the demand for lithium resources globally will reach 531,000 tons by 2030, revealing a significant gap in supply of around 81,000 tons
This disparity indicates that the market for lithium recycling could become very lucrative in the forthcoming years.
Nevertheless, even as the lithium battery recycling industry stands on the brink of expansion, Jinsheng faces tough competition from several established energy conglomerates venturing into battery recoveryNotable companies such as CATL, Hive Energy, Ganfeng Lithium, and EVE Energy have committed substantial resources toward developing their recycling capacities, escalating the competition in the marketplace.
In pursuit of rapid market expansion, Jinsheng New Energy has unveiled ambitious capacity expansion plansThe company disclosed its intention to enhance production facilities incrementally by 2025, targeting the processing of 280,000 tons of retired ternary lithium batteries annually
This aggressive approach could position Jinsheng at the forefront of the recycling value chain, should market conditions align favorably.
Moreover, in its quest to ensure robust utilization of funds raised through its IPO, Jinsheng has earmarked these resources for the development of its lithium iron phosphate processing plant in Ganzhou, Jiangxi province, and for securing upstream raw material resources—two critical areas to support its enhanced production capacity.
Additionally, Jinsheng aims to penetrate deeper into the supply chain by focusing on cathode material productionIt anticipates introducing lithium iron phosphate battery cathode materials to the market by 2025, while simultaneously planning to diversify further into downstream products through the production of nickel and cobalt from electrolysis processes around that time.