This week marked a significant moment for China’s Zhongwei Co., as approximately 377 million restricted shares, valued at nearly 17 billion yuan, faced a lifting of their trading banThis event represents the unlocking of restricted shares that had been held since the company went public three years prior, and the volume is noteworthy as it sets a recent record for the number of restricted shares unbound.
Zhongwei Co. first entered the marketplace on December 13, 2020, with an initial offering price of 24.6 yuanThe company's stock experienced a remarkable debut, opening at 76.1 yuan on its first day and closing at 84.5 yuan, giving it an impressive rise of 245% that day, resulting in a market capitalization of 566 billion yuanBy the end of 2021, the momentum did not wane; Zhongwei's share price soared, eclipsing 200 yuan at one point, peaking at 214 yuan, and propelling its total market value above 1.4 trillion yuan.
This meteoric rise in valuation significantly enriched the Wang family, notably the firm's controlling figure, Deng WeimingBy 2023, the Deng family had amassed a fortune of 24.1 billion yuan, positioning them atop the New Fortune 500 rich list and surpassing notable figures such as Zhang Hui of Manbang and Tao Huabi of Lao Gan Ma, thereby establishing themselves as the wealthiest family in Guizhou province.
Nevertheless, over the past year, Zhongwei's stock prices have significantly plummeted, experiencing what could be described as a financial rollercoasterThe price has effectively halved multiple times, culminating in a distressing seven consecutive weeks of declinesAs of December 18, the company's shares fell by 2%, settling at a historical low of 43.9 yuan, with a total market capitalization shrinking to 29.47 billion yuan—a staggering decrease of over 100 billion yuan from its former high.
The drastic fluctuation in Zhongwei Co.'s stock price has inevitably impacted the Liang family's fortunes as well
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What has transpired?
Zhongwei Co. specializes in the research, production, processing, and sale of lithium battery cathode material precursors and is recognized as a world-leading producer of ternary precursors.
Within the battery supply chain, battery manufacturers procure precursors, which are then subjected to specific processes to produce cathode materials used in producing lithium-ion batteries, including those employing ternary lithium and lithium iron phosphate technologies.
The recent surge in the electric vehicle (EV) market has greatly stimulated the growth in demand for power batteries, leading to significant consumer interest in upstream ternary precursors.
Zhongwei Co. counts several major battery firms among its clientele, including LG Chem, CATL (Contemporary Amperex Technology CoLimited), and China Innovation AviationBy 2022, the top five clients accounted for 60% of the company's sales, with the largest customer contributing 5.5 billion yuan.
In terms of performance metrics, from 2019 to 2022, Zhongwei experienced substantial revenue growth, with figures of 5.31 billion, 7.44 billion, 20.07 billion, and 30.34 billion yuan, respectivelyNet profits for the same period were 180 million, 420 million, 940 million, and 1.54 billion yuan.
However, this year has seen a dramatic drop in prices for lithium iron phosphate batteries, further affecting the cost of ternary materials.
In the first three quarters of the year, Zhongwei Co. reported revenue of 26.191 billion yuan, with a net profit attributable to shareholders of 1.387 billion yuan, indicating a sharp deceleration in the growth rate of both revenue and profit.
Following its IPO, Zhongwei initiated a new wave of both domestic and international expansion.
When the company went public, it raised roughly 1.4 billion yuan, with post-issuance revenues earmarked mainly for the construction of a high-performance power lithium-ion battery ternary precursor base in Western China and for operational funding.
Just six months later, in July 2021, the firm announced a proposal for a private placement to raise 6.68 billion yuan, allocating 1.995 billion yuan for liquidity, while the remaining funds would be directed towards four expansion projects.
By November 2021, Zhongwei had completed a substantial private placement, issuing approximately 36 million shares at a price of 138.8 yuan each, raising around 5 billion yuan intended for further development of ternary cathode materials and operational liquidity support.
However, the original pricing of these shares stands in stark contrast to the current market value, which has notably depreciated.
In terms of investments, on December 9, 2021, Zhongwei unveiled a major investment initiative, signing an agreement with the local government of Kaiyang County to invest around 10 billion yuan into constructing a 200,000-ton integrated production line for iron phosphate and lithium iron phosphate materials.
The company's focus is on developing high-nickel low-cobalt ternary precursors as well as high-voltage cobalt oxide, indicating that nickel plays a vital role in their ternary materials composition.
Among its suppliers are prominent nickel giants like Tsingshan Holding, ATL, and Glencore.
In recent years, Zhongwei has been actively purchasing nickel mines
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As early as spring 2021, it began importing high-grade nickel from Indonesia, but the situation shifted when Indonesia banned the export of unrefined nickel ore, compelling Zhongwei to establish local processing facilities and export refined products back to China.
In May 2022, Zhongwei announced collaborations with three wholly-owned subsidiaries and RIGQUEZA to collectively invest 1.26 billion USD (approximately 900 million yuan) in a laterite nickel ore smelting project.
In addition to foreign investments, in 2022, Zhongwei allocated funds to three projects in Guizhou focused on nickel sulfate, high-grade nickel from Guangxi, and iron phosphate—covering critical raw materials.
This year, Zhongwei has continued to aggressively increase its investments.
On June 21 of this year, the company announced that its wholly-owned subsidiary entered into a joint venture agreement with POSCO Future M to construct a 110,000-ton high-nickel precursor project in Pohang, South Korea, with total expected investment of 6.1 billion yuanConcurrently, another subsidiary signed an agreement with POSCO Holdings to establish a nickel refining joint venture, expected to require a fixed investment of around 2.2 billion yuan, contributing 5.76 billion yuan towards the total project cost.
In mid-July, Zhongwei also revealed that its subsidiary had agreed to acquire 67% of PT Nadesico Nickel Industry, a nickel smelting entity, for approximately 2 billion USD, translating to about 1.4 billion yuan.
Zhongwei stated that this strategy aims to align shareholder interests, company goals, and employee benefits, effectively transforming core staff from mere managers into partners.
According to its 2022 report, Zhongwei has successfully established four industrial bases across China—including in Tongren, Ningxiang, Qinzhou, and Kaiyang—while its international footprint expands through a resource base in Indonesia along with plans for global industrial hubs that encompass East Asia, Southeast Asia, Europe, and North America.
As of this year's third quarter, Zhongwei reported liquid assets amounting to 12.1 billion yuan with current liabilities reaching 15.35 billion yuan, which includes short-term loans of 2.58 billion yuan, accounts payable of 7.53 billion yuan, and 3.2 billion yuan of non-current liabilities due within a year.
Due to rapid investment in expansion projects, the scale of Zhongwei's construction in progress has surged to 10 billion yuan
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