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Ganfeng Lithium (002460.HK) SZ), a subsidiary of the lithium battery business, suffered a collective departure from shareholders.

Ganfeng Lithium recently announced that it agreed that its holding subsidiary, Ganfeng Lithium, intends to use its own funds to reduce capital and repurchase the shares held by some shareholders.

A total of 28 shareholders are involved, of which 23 will empty all their shares, including Hainan Jimu Venture Capital Co., Ltd. under Xiaomi Technology Co., Ltd., Hubei Xiaomi Yangtze River Industry Fund Partnership (Limited Partnership), Dongfeng Motor Group Co., Ltd. indirectly controlled Xinzhifeng (Wuhan) Equity Investment Fund Partnership (Limited Partnership), photovoltaic inverter listed company GoodWe (688390. SH) and so on.

The number of shares repurchased by Ganfeng Lithium Battery in this directional capital reduction is planned to be no more than 499 million shares, and the corresponding repurchase funds are about 1.6 billion yuan.

As for the reason for the capital reduction and repurchase, Ganfeng Lithium said that this is to consolidate Ganfeng Lithium's important positioning in the company's strategic layout of upstream and downstream integration of lithium ecology.

However, the departure of Ganfeng Lithium's major shareholders may be related to the obstruction of its IPO.

Founded in 2011, Ganfeng Lithium is the main subsidiary of Ganfeng Lithium in the field of downstream lithium batteries.

In November 2022, Ganfeng Lithium announced that it would start the feasibility demonstration of Ganfeng Lithium's spin-off and listing on the Shenzhen Stock Exchange, and authorized the company and Ganfeng Lithium's management to promote the split and listing of Ganfeng Lithium in a timely manner in accordance with the company's operating conditions and relevant laws.

In addition to the above-mentioned companies, there are Jiangxi Jiahe Electroacoustic Technology Co., Ltd., a wholly-owned subsidiary of Jiahe Intelligence, and Xinyu Xingang Investment Management Co., Ltd., a wholly-owned subsidiary of Xinyu Iron and Steel.

According to the shareholder agreement announced by Ganfeng Lithium at that time, if Ganfeng Lithium does not meet the conditions for spin-off and listing according to regulatory policies such as laws, regulations and listing rules, and is expected to be unable to achieve a qualified IPO before December 31, 2025, the investor shareholders have the right to request the initiation of the share repurchase procedure.

In July last year, Ganfeng Lithium received the "Administrative Penalty Decision" issued by the Jiangxi Supervision Bureau of the China Securities Regulatory Commission on suspicion of insider trading of Jiangte Motor stocks, confiscated 1.105 million yuan of illegal income, and imposed a fine of 3.316 million yuan.

Li Liangbin, chairman and then president of Ganfeng Lithium, and Ou Yangming, then secretary of the board of directors, were both warned and fined 600,000 yuan and 200,000 yuan respectively.

According to the Rules for the Spin-off of Listed Companies (Trial) issued by the China Securities Regulatory Commission (CSRC) in January 2022, listed companies or their controlling shareholders and actual controllers have been subject to administrative penalties by the CSRC in the last 36 months and are not allowed to be spun off and listed.

This means that Ganfeng Lithium's spin-off and listing plan has been forced to be shelved and cannot be implemented until at least July 2027. So far, there has been no further official disclosure of the company's spin-off and listing plan.

Ganfeng Lithium said at the first extraordinary general meeting of shareholders in 2025 held on March 17 that the current share repurchase of Ganfeng Lithium will not cause too much financial pressure on the company.

According to Jiemian News, as of the first three quarters of 2024, Ganfeng Lithium has monetary funds of 7.014 billion yuan, and the proportion of repurchase funds is 22.81%.

Founded in 2000, Ganfeng Lithium is a leading global lithium enterprise, and it has been building an integrated upstream and downstream lithium ecological industry chain, with business running through upstream lithium resource development, midstream lithium salt deep processing and lithium metal smelting, downstream lithium battery manufacturing and comprehensive recycling of retired lithium batteries.

In the first half of last year, the lithium battery series products, which were mainly responsible for Ganfeng Lithium, contributed 28.23% of the operating income to Ganfeng Lithium, an increase of nearly 6 percentage points over the same period last year.

Ganfeng Lithium's business is roughly divided into three major sectors: consumer batteries, energy storage power batteries and solid-state batteries. Among them, the energy storage power battery segment has the largest business volume.

According to the 2024 energy storage cell shipment list disclosed by Zhongguancun Energy Storage Industry Technology Alliance, Ganfeng Lithium's energy storage cell shipments last year ranked tenth in China.

In terms of power batteries, according to the data of the China Automotive Power Battery Industry Innovation Alliance, last year, Ganfeng Lithium entered the top ten in China in terms of power battery loading in plug-in hybrid passenger cars, new energy commercial vehicles and other segments.

According to the official website, Ganfeng Lithium has set up production and R&D bases in Dongguan, Ningbo, Suzhou, Xinyu, Huizhou, Chongqing, Xiangyang, Hohhot and other places, and has successively developed more than 30 products in 5 series, including power, energy storage, digital, wearable, and solid-state lithium batteries.

In addition to the obstacles to listing, Ganfeng Lithium's performance last year was not optimistic.

In 2023, Ganfeng Lithium will achieve a revenue of 5.751 billion yuan and a total profit of 164 million yuan. In the first three quarters of last year, Ganfeng Lithium's revenue was 2.609 billion yuan, with a loss of 52.9402 million yuan. This is also one of the reasons why Ganfeng Lithium suffered a net loss of 640 million yuan in the first three quarters of last year.

Ganfeng Lithium mentioned in the third quarter report last year that the decline in performance was mainly affected by the downward cycle of the lithium industry and the decline in the sales price of lithium salt and lithium battery products. This also explains the reason for Ganfeng's lithium loss.

During the same period, CATL (300750. SZ), Sunwoda (300207. SZ), Guoxuan Hi-Tech (002074. SZ) and other companies have achieved a year-on-year increase in net profit, and none of them have lost money.

According to the analysis of high-tech lithium battery, although the concentration of the domestic battery industry has declined, the head enterprises still dominate the market. Under the stock competition pattern, small and medium-sized enterprises lack large-scale effect, and the cost pressure and market pressure are greater. In addition, as leading enterprises begin to expand into segments such as two-wheeled vehicles and power tools, small and medium-sized enterprises will face greater pressure.

As of September 30, 2024, Ganfeng Lithium has total assets of 16.662 billion yuan and an asset-liability ratio of 56.39%. During the same period, Ganfeng Lithium had total assets of 98.672 billion yuan and total liabilities of 46.545 billion yuan, which showed that its asset-liability ratio was 47.17%.

As a leader in the lithium industry, Ganfeng Lithium's main source of revenue is lithium compounds, and its main products include battery-grade lithium hydroxide, battery-grade lithium carbonate, lithium chloride, lithium fluoride, etc. These are mainly used in lithium battery materials such as electric vehicles, energy storage, portable electronic devices, and chemical and pharmaceutical fields.

Ganfeng Lithium has controlled a number of lithium resources in Australia, Argentina, Ireland, Mali, Qinghai, Jiangxi, Inner Mongolia and other places. In 2022, when resource prices are high, Ganfeng Lithium's net profit will be as high as 20.504 billion yuan.

However, since 2023, lithium prices have begun to fall rapidly, and the sales price of Ganfeng Lithium's lithium salt products has fallen, although shipments have increased, but the operating performance has declined year-on-year.

In 2023, Ganfeng Lithium's net profit will decline by more than 75% year-on-year to about 4.95 billion yuan. In 2024, it will turn from profit to loss, with an estimated net loss of 1.4 billion to 2.1 billion yuan.

The upstream business is difficult to improve, and the downstream lithium battery business cannot be relied on, and Ganfeng Lithium recently hopes to develop the downstream energy storage field.

At an investor relations event in November last year, Ganfeng Lithium said that as the fastest growing business in the company's lithium battery sector, the company's energy storage is not only a battery, but also extends to the construction of energy storage systems and energy storage power stations in the midstream, and develops 4C and 5C power fast charging business.

In addition to battery cells, Ganfeng Lithium's products in the field of energy storage also include large-scale energy storage systems (above MW level), small energy storage systems (below MW level), uninterruptible power supplies, microgrid trial platform energy storage systems, etc.

Ganfeng Lithium also recently announced that it would acquire all the shares of its holding subsidiary, Shenzhen Yichu Energy Technology Co., Ltd. (hereinafter referred to as Shenzhen Yichu), from Ganfeng Lithium for 200 million yuan.

Ganfeng Lithium originally held 90% of the equity of Shenzhen Yichu, but because Ganfeng Lithium and its subsidiaries planned to increase their capital to invest in Shenzhen Yichu and Shenzhen Yichu planned to introduce an employee shareholding platform, after the completion of the capital increase and share expansion, Ganfeng Lithium actually acquired 71.352% of the equity of Shenzhen Yichu from Ganfeng Lithium.

Founded in May 2024, Shenzhen Easy Storage has formed a business system with the investment and construction of independent shared energy storage power stations on the grid side as the core, covering virtual power plants, new energy power intelligent operation and management platforms, energy management systems, EMS technology research and development, etc. According to Shenzhen Yichu Guanwei, the company has built a number of energy storage power station projects in Heyuan, Guangdong, Ningxia, Taizhou, Jiangsu and other places.

Ganfeng Lithium said that the increase in paid-in capital is mainly to ensure the capital needs of Shenzhen Yichu's daily operation, which is conducive to cultivating the future profit growth point of the company's energy storage business.