the old clothing giant Ningbo Shanshan Co.Ltd(600884) who started by selling shirts has actively transformed its layout in the past 20 years and finally transformed into the only enterprise in China covering the production of positive and negative materials and electrolyte. Now why sell the lithium battery assets whose performance is recovering?
Since January 7, Ningbo Shanshan Co.Ltd(600884) share price has been “falling endlessly”, closing down for three consecutive trading days. As of the closing on January 11, Ningbo Shanshan Co.Ltd(600884) was reported at 27.95 yuan / share, down 2.44%, with a total market value of 59.895 billion yuan.
The downturn of Ningbo Shanshan Co.Ltd(600884) in the secondary market was closely related to an asset sale announcement on January 6, when it said it would transfer its lithium battery assets to related parties.
share price hit a new low
On January 6, Ningbo Shanshan Co.Ltd(600884) announced that it was agreed that the wholly-owned subsidiary Ningbo Yongshan Lithium Industry Co., Ltd. (hereinafter referred to as “Ningbo Yongshan”) would transfer its 100% equity of Hunan Yongshan Lithium Industry Co., Ltd. (hereinafter referred to as “Hunan Yongshan”) to the company’s related party Jinzhou Jixiang Molybdenum Co.Ltd(603399) (hereinafter referred to as ” Jinzhou Jixiang Molybdenum Co.Ltd(603399) “), with a total transaction price of 480 million yuan.
It should be noted that since the actual controllers of Jinzhou Jixiang Molybdenum Co.Ltd(603399) and Ningbo Shanshan Co.Ltd(600884) are Zheng Yonggang, the above transactions constitute related party transactions.
But what the market questions is, should Hunan Yongshan be sold?
Hunan Yongshan is mainly engaged in the R & D, manufacturing and sales of lithium salt products such as lithium carbonate and lithium hydroxide. It was originally planned to supply lithium salt and other raw materials for the company’s cathode business.
From the performance point of view, Hunan Yongshan is not depressed. In 2020, Hunan Yongshan’s revenue was only 1.52 million yuan and its net profit loss was 4.89 million yuan. In the first three quarters of 2021, the revenue of Hunan Yongshan suddenly increased to 27.47 million yuan, and the net profit also changed from loss to profit, reaching 6.31 million yuan.
In addition, Ningbo Shanshan Co.Ltd(600884) has revealed that the planned capacity of Hunan Yongshan lithium salt project is about 25000 tons of lithium carbonate and lithium hydroxide. The phase I project is expected to be put into trial production in the fourth quarter of 2021, with a planned capacity of 10000 tons of lithium carbonate (including 5000 tons of carbonization line) and 15000 tons of lithium hydroxide. In late December 2021, Ningbo Shanshan Co.Ltd(600884) said on the interactive platform that Hunan Yongshan phase I project is currently in the stage of equipment installation and commissioning.
Why did Ningbo Shanshan Co.Ltd(600884) choose to sell lithium battery assets when the performance recovered significantly and the capacity was about to be released?
Ningbo Shanshan Co.Ltd(600884) said that the sale of assets aims to further deepen the specialization development strategy, focus on the development of polarizer and lithium battery cathode material business, optimize resource allocation and enhance the company’s core competitiveness. Hunan Yongshan is currently in the construction investment period, and it still needs continuous capital investment and working capital support in the future. At the same time, considering that the holding right of Shanshan energy, the positive business of the company, has been transferred to BASF, and the raw material procurement and supply of the positive business will be incorporated into BASF’s global supply chain management system. With the transfer of the holding right of the positive business of the company, Its industrial chain synergy is also limited.
The response of the secondary market is honest. Since the disclosure of the sale announcement on January 6, Ningbo Shanshan Co.Ltd(600884) closed down for three consecutive trading days, and the share price hit a new low of 27.76 yuan / share in recent four months. In contrast, its related parties and counterparties Jinzhou Jixiang Molybdenum Co.Ltd(603399) pulled three limit plates in three trading days from January 7 to January 11.
clothing giant Transformation Road
“Shanshan, don\’t be too natural and unrestrained.”
Twenty years ago, almost everyone knew this slogan.
In the first half of his life, he was a clothing giant who started by selling shirts. In 1996, Ningbo Shanshan Co.Ltd(600884) landed on the Shanghai Stock Exchange only four years after the establishment of the restructuring, and this Ningbo Company became the first listed garment enterprise in China. In its heyday, Ningbo Shanshan Co.Ltd(600884) stores had more than 2000. In 1998, it achieved the first market share for seven consecutive years, accounting for nearly 40% of the Chinese market.
However, superimposed on factors such as the Asian financial crisis, Zheng Yonggang, the helmsman of Shanshan, predicted that the downward cycle of the clothing market would come and planned the company’s transformation. In 1999, Ningbo Shanshan Co.Ltd(600884) established Shanshan technology and officially entered the lithium battery track. Since then, Ningbo Shanshan Co.Ltd(600884) has made great progress. In 2003 and 2005, Shanshan energy and Dongguan Shanshan came out one after another, laying out the field of cathode materials and electrolyte; In 2016, Shanshan energy was listed on the new third board. At the same time, Ningbo Shanshan Co.Ltd(600884) has also frequently settled in finance, new energy vehicles and photovoltaic industries.
So far, Ningbo Shanshan Co.Ltd(600884) has changed from “the first share of clothing” to the only enterprise in China covering the production of anode and cathode materials and electrolyte.
The big stall also makes Ningbo Shanshan Co.Ltd(600884) experience pain. In 2020, the loss scale of the company’s non core businesses such as charging piles, energy storage and clothing increased significantly year-on-year, resulting in a decrease of 296 million yuan in the net profit attributable to the parent company in that year.
Ningbo Shanshan Co.Ltd(600884) is also being stripped. Following the spin off of the garment business, in February 2020, Ningbo Shanshan Co.Ltd(600884) announced that it planned to transfer 48.1% of its shares in Shanshan brand at a price of 168 million yuan. After the equity transfer, Ningbo Shanshan Co.Ltd(600884) will reduce its shareholding in Shanshan brand to 19.37%, and will no longer control the latter. Ningbo Shanshan Co.Ltd(600884) indicates that the company’s clothing brand operation business and financial business have been no longer included in the scope of consolidated statements since July 2020 and 2021 respectively.
Ningbo Shanshan Co.Ltd(600884) also achieved transnational “marriage” not long ago. At the end of August 2021, BASF, the global leader in lithium cathode materials, announced that it had completed the acquisition of 51% equity of Shanshan energy, mastered the actual control of the latter, and Ningbo Shanshan Co.Ltd(600884) fell to the second largest shareholder.
the actual controller takes the equity at a low price
After fully entering the lithium battery track, Ningbo Shanshan Co.Ltd(600884) began to develop new business.
In December 31, 2021, Ningbo Shanshan Co.Ltd(600884) announced that it had completed the 3 billion 50 million yuan increase. The proceeds were mainly used for the Suzhou Shan Jin Zengzi, and it was 70% stake in Suzhou Shan Jin. It also purchased 70% indirect interest in China’s Chinese mainland, China Taiwan and South Korea’s LCD polarizing business and related assets through the Suzhou Shan Jin through LG.
In February 2021, Ningbo Shanshan Co.Ltd(600884) said it had completed the Chinese mainland delivery of LG chemical polarizer. After the acquisition, Ningbo Shanshan Co.Ltd(600884) will focus on the two core businesses of lithium battery materials and polarizers.
However, the above fixed increase is controversial. The fixed increase results show that the unit price of the fixed increase is 6.25 yuan / share, while the market price on December 31, 2021 is 32.77 yuan / share, which is five times the fixed increase price. In addition, the three issuing objects are the companies of Zheng Yonggang, the actual controller. Zheng Yonggang benefited a lot by taking equity at a low price.
Stripping and expansion go hand in hand, and the performance of Ningbo Shanshan Co.Ltd(600884) fluctuates frequently and sharply. According to the annual report, in 2016, Ningbo Shanshan Co.Ltd(600884) net profit attributable to parent decreased by 50.34% year-on-year, increased by 171.38% and 24.43% respectively in 2017 and 2018, and decreased by 75.8% and 48.85% again in 2019 and 2020.
In addition, its electrolyte business has not been profitable for many years. From 2017 to 2020, the net profit attributable to the parent company of Ningbo Shanshan Co.Ltd(600884) electrolyte business lost 21.88 million yuan, 19.55 million yuan, 40.82 million yuan and 280000 yuan respectively.
In 2021, benefiting from the continuous improvement of the prosperity of the new energy vehicle industry, Ningbo Shanshan Co.Ltd(600884) performance recovered. In the first three quarters of 2021, the company achieved a revenue of 15.712 billion yuan, a year-on-year increase of 182.43%, and a net profit attributable to the parent company of 2.774 billion yuan, a year-on-year increase of 899.29%.
High debt is also one of Ningbo Shanshan Co.Ltd(600884) current difficulties. In the first three quarters of 2021, its asset liability ratio increased by 25.26 percentage points year-on-year to 56.64%. Specifically, notes payable and accounts payable are RMB 3.496 billion, and interest bearing liabilities include short-term loans of RMB 4.232 billion and long-term loans of RMB 4.738 billion.
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(source: International Finance News)
