“Shell King” Zheng Yonggang pushed the market value of Shanshan to 60 billion

On April 19, a news that Shanshan’s subsidiary introduced BYD, Ningde Times, and PetroChina Kunlun Capital for war investment attracted the attention of the capital market.

It is reported that Ningbo Shanshan New Energy Technology Development Co., Ltd. and the above-mentioned three capitals will add a total of 3.05 billion yuan to Shanghai Shanshan Lithium Battery Materials Technology Co., Ltd. The capital increase will be used for the daily operations of Shanghai Shanshan Lithium Battery and its subsidiaries. Activity.

Many investors are curious, why Shanshan shares have such a big “show” and can win the favor of many giants in the new energy industry? According to the data, Shanshan Co., Ltd. was founded by Zheng Yonggang. It started out by making suits. However, when the business was booming, Zheng Yonggang was determined to transform into new energy. Up to now, Shanshan Co., Ltd. has become the world’s largest integrated supplier of lithium-ion battery materials. .

The company’s just-released annual report shows that in 2021, Shanshan’s revenue will be 20.699 billion yuan, a year-on-year increase of 151.94%; the net profit attributable to the parent is 3.340 billion yuan, a year-on-year increase of 2320%.

According to data from Oriental Fortune Choice, since Zheng Yonggang’s return at the end of 2020 to April 20, the combined market value of Shanshan and Jixiang shares has risen from 42.5 billion to 66.47 billion. Among them, Jixiang shares is one of the bull stocks this year, and its share price rose by more than 310% during the year. Thanks to this, in the “2022 Hurun Global Rich List” released by Hurun in March 2022, Zheng Yonggang ranked 1864th with a net worth of 12.5 billion yuan.

However, in recent years, the outside world has raised a lot of doubts about Zheng Yonggang and his Shanshan family about “capital maneuvering”. Due to many operations in “Shell” listed companies, Zheng Yonggang won the title of “Shell King”.

Shanshan’s performance has skyrocketed, and the polarizer business has become a “thigh”

At a dinner party in March 1999, Wang Weigang, president of Anshan Research Institute, and Zheng Yonggang mentioned that the subject of new energy lithium-ion anode materials of the Carbon Research Institute, the 10 million yuan allocated by the state has been spent, but the subject has not been completed.

The speaker has the intention, and the listener has the intention. At that time, Zheng Yonggang was worried about the transformation of the company. Although his Shanshan suit has been ranked first in China for seven consecutive years, with a market share of 37%, Zheng Yonggang is still optimistic about the future of the clothing industry. He just moved the company’s headquarters to Shanghai, established Shanshan Holdings, and proposed a diversified business strategy with three major sectors: clothing, new energy, and financial investment.

Therefore, Zheng Yonggang first invested 80 million yuan to successfully complete the project, and then invested 300 million yuan to move the talents of the Carbon Research Institute to Shanghai, and thus completed the layout of lithium battery anode materials. In the following 6 years, Shanshan Co., Ltd. has successively set foot in lithium battery cathode materials and electrolytes, and has gradually become a comprehensive supplier of lithium battery materials.

It is worth noting that Zheng Yonggang also announced his resignation as the company’s chairman in 2007 after the new energy industry layout of Shanshan Co., Ltd. was gradually improved, and he retired to the background with peace of mind.

In 2016, new energy vehicles entered the mainstream of the market, and the performance of Shanshan shares, which had been dormant for many years, began to explode.

In the field of new energy vehicles, two star products named “lithium iron phosphate” and “ternary lithium battery” named after the positive electrode of lithium batteries have been well known to the outside world. In the past two years, under the background of the continuous improvement of the new energy vehicle industry, the crazy price increase of lithium battery cathode materials lithium, nickel and anode material graphite has benefited many suppliers.

In 2020, Shanshan’s revenue from lithium battery materials will reach 6.916 billion yuan; in 2021, this figure will further increase to 9.125 billion yuan, a year-on-year increase of 31.95%. In terms of net profit attributable to the parent, the company’s lithium battery material business will reach 1.195 billion yuan in 2021, 907 million yuan more than the previous year.

Shanshan Co., Ltd. stated that due to factors such as strong downstream demand, the market order demand for anode products far exceeds the supply capacity, and its production capacity has reached full capacity.

In addition, the consolidation of LG’s polarizer business is also an important reason for Shanshan’s performance soaring.

According to the financial report, Shanshan’s revenue in 2021 is mainly composed of three parts: lithium battery materials, polarizers and other businesses. Among them, the polarizer business brings revenue to the company as high as 9.944 billion yuan, accounting for 48.04% of the total revenue. The proportion of lithium battery materials is even higher than 44.08%.

At the same time, during the reporting period, the net profit attributable to the parent of the polarizer business reached 1.197 billion yuan, which was also higher than the 1.195 billion yuan of lithium battery materials.

Radar Finance noticed that this part of the new business originated from a merger and acquisition in 2020, and was also regarded by the outside world as another big gambling transformation of Zheng Yonggang.

In June 2020, Shanshan announced that it plans to spend US$770 million to start the acquisition of LG Chem’s LCD polarizer business and a 70% equity project in related assets. In order to preside over this acquisition, Zheng Yonggang made a high-profile return after 13 years. In an interview with the media, he expressed sufficient confidence: “In the future, we will be far ahead and have the right to speak in setting industry standards.”

According to the data, the polarizer is one of the key components of the liquid crystal display, and its main function is to improve the light transmittance and viewing angle range of the liquid crystal panel by controlling the light. It accounts for about 10% of the cost structure of the LCD panel, and plays an important role in the display effect of the LCD panel.

According to the data of market research agency Omida, in 2020, LG Chem’s polarizer business (the company completed the acquisition of LG Chem’s LCD polarizer business in mainland China on February 1, 2021) will occupy about 25% of the market share, ranking No. 1 in the world. one. According to the agreement, from 2021 to 2023, Shanshan will acquire the remaining shares of LG Chem’s polarizer business in batches.

“The acquisition of polarizers is Shanshan’s third crossover, and it is also another major venture for me after the age of 60.” Zheng Yonggang said.

Is the main business sluggish behind the cross-border acquisition?

However, it was this complete cross-border acquisition that caused a lot of controversy for Shanshan.

From the perspective of Shanshan shares in the secondary market, in about 26 years from 1996 to the present, the share price of Shanshan shares has achieved a 30-fold increase. In the middle of the year, its share price rose only 10 times, which means that most of the company’s market value growth was achieved after the acquisition of LG’s polarizer business.

According to the financial report, before the acquisition, Shanshan’s performance has been declining for many years. Among them, revenue has declined year-on-year for two consecutive years from 2019 to 2020, and non-net profit deducted has declined for three consecutive years. In 2020, there is also a loss.

Specifically, among the four core materials of positive electrode, negative electrode, electrolyte, and diaphragm upstream of lithium batteries, Shanshan shares are involved in three of them, and each of them can be ranked in the top five or even the top three in the domestic market, but the competitiveness of each are gradually declining.

Taking the company’s earliest contact with the negative electrode as an example, the research report of Soochow Securities shows that the current competition pattern of the negative electrode industry is basically stable in the situation of “big four and three small”, of which the “big four” are Bettray, Shanshan, Putailai and Kai. gold. In 2021, Shanshan’s negative electrode production market share will be 15%, a year-on-year decrease of 1%, ranking second in the industry, while the first company’s market share will be 25%.

On the positive side, from 2018 to 2020, the company’s related business gross profit margins were 17.13%, 12.84%, and 12.38%, gradually declining. In 2021, Shanshan Co., Ltd. has already started the divestiture of this business. The relevant actions include transferring the control of its Shanshan Energy to the German chemical company BASF, and transferring 100% equity of Yongshan Lithium Industry.

In contrast to the stripping action, in the global market, benefiting from the demand for lithium battery installed capacity, the cathode market is maintaining high growth. Soochow Securities predicts that the total global cathode demand will be 1.335 million tons in 2022, and will reach 3.507 million tons by 2025.

In terms of electrolyte, Shanshan’s expansion is also relatively slow. From 2019 to 2021, the market share of the company’s electrolyte production was 10.1%, 8.4%, and 3.5%, a significant decline.

Although this part of the company’s business will benefit from the soaring price of lithium hexafluorophosphate in 2021, it will turn losses into profits and the gross profit margin will also increase significantly, but as of the end of 2021, the company has a total production capacity of 40,000 tons of electrolyte and 4,000 tons of lithium hexafluorophosphate. Zhoubang and other leading electrolyte companies have opened up the gap. According to the survey minutes of Shanshan, the company will divest the electrolyte business, and it is expected to speed up the divestiture this year.

In addition to the main business, in 2020, Shanshan’s non-core businesses such as charging piles, energy storage, clothing, etc. are still in a state of loss, with a total net loss attributable to the parent of 296 million yuan, an increase of 130 million yuan year-on-year.

So, is the acquisition of LG Chem’s polarizer business a long-term solution to boost performance? Some people in the industry also hold conservative views on this.

On the one hand, this acquisition significantly increased the financial pressure on Shanshan. At the end of 2021, Shanshan’s non-current liabilities due within one year surged by 1026.10% year-on-year to 3.623 billion yuan, and the company’s asset-liability ratio also increased from 43.33% to 51.97%. The cash flow from operating activities turned from positive to negative, down 210.69% year-on-year.

In order to improve the liquidity of the company’s funds, Shanshan Co., Ltd. once chose to raise 3.096 billion yuan in the secondary market by means of fixed increase; it also asked the controlling shareholder Shanshan Group to pledge financing shares; Under the circumstance that there are still 9.295 billion yuan in funds, CATL, BYD and other capitals were introduced to jointly increase the capital of its subsidiary Shanghai Shanshan Lithium Power by 3.05 billion yuan.

The company said that Shanghai Shanshan Lithium will help optimize its asset-liability structure, reduce financial costs, enhance capital strength, and provide financial guarantee for the expansion of anode materials business through this capital increase and share expansion.

On the other hand, although Shanshan has successfully transformed from the apparel industry to the new energy industry, the subsequent company has hit a bottleneck in the process of diversification and expansion. In this context, whether the company can operate a brand new business well remains to be tested by time.

Zheng Yonggang realizes his dream of “financier”?

“I hope I come in from clothing and go out from finance. I hope to become a financier.” Zheng Yonggang said in an interview with the media in 2015.

Zheng Yonggang’s cross-border capital operation level has indeed been tested by the market. In the history of the growth and operation of Shanshan companies, Zheng Yonggang has verified the feasibility of boosting stock prices or cashing out through restructuring and shell sales.

As early as 2002, Shanshan Group became the major shareholder of Changchun Heat Shrinking through the transfer of equity. Soon after, Changchun Heat Shrinkage changed its name to Zhongke Yinghua. According to reports, Zheng Yonggang once traded in the rare earth transaction of Zhongke Yinghua, but with the termination of the acquisition, Zheng Yonggang also completely withdrawn from Zhongke Yinghua.

Around 2015, the Shanshan family made a comeback. It first let its “Hongshi Investment” cost 1.29 billion yuan to transfer the shares held by the controlling shareholder of “Aidixi” and its concerted action, making Zheng Yonggang the actual controller of the company, and then promoted the reorganization of Aidixi. Aidixi was successfully listed by Shentong Express, and its stock price once ushered in 13 daily limits.

Also in 2015, Shanshan, Ningbo Shunchen, became the actual controller of Jiangquan Industrial through the transfer of shares. However, Zheng Yonggang’s attempts to backlist Jiangquan Industrial from other companies have since failed. In the end, Ningbo Shunchen completely left Jiangquan Industry after re-transferring the shares.

It is worth mentioning that after Zheng Yonggang returned to Shanshan, he still did not stop being active in the capital market.

In 2017, Ningbo Jutai, another company of the Shanshan family, became the controlling shareholder of Xinhualong, a well-known domestic molybdenum company, through the transfer of shares. After that, Xinhualong changed its name to Jixiang Shares. Since then, Zheng Yonggang has started the reorganization operation again.

Under the leadership of Zheng Yonggang, in the following five years, Jixiang Co., Ltd. has made five cross-border acquisitions, and the target companies are all in new fields.

Zheng Yonggang first promoted the acquisition of the mobile game company Beijing Kaitian, the overseas game company Gram Games and Fanya Culture by a listed company called “Xinhua Dragon”. But under strict supervision, the plan failed to take off. Subsequently, Xinhualong turned its attention to the film and television field. It acquired the entire equity of Horgos Jixiang Film and Television Media Co., Ltd. at zero consideration, and increased its capital by 100 million yuan, officially converting the company’s main business to molybdenum Industry and film and television tracks in parallel.

After changing its name to Jixiang Shares, thanks to the growth of the film market, the company’s share price ushered in a “sweet period”, but after the capital ebb, the company’s film business experienced a cliff-like decline. Therefore, Zheng Yonggang started to think about more interaction in the field of military control and marketing. After two consecutive failed reorganizations, Zheng Yonggang “returned” to the lithium battery industry that he was familiar with.

As mentioned above, Shanshan has started the divestiture of its cathode business since 2021, and it is the related party Jixiang that will be transferred 100% of the equity of Hunan Yongshan held by Ningbo Yongshan in January 2022.

The announcement shows that Hunan Yongshan mainly produces battery-grade/industrial-grade lithium carbonate and lithium hydroxide and other products as the main raw materials for lithium battery cathode materials, and downstream applications include power batteries and energy storage batteries.

Although the acquisition was pointed out by many investors that it was suspected of “left hand over right hand”, the share price of Jixiang shares rose immediately after the announcement of the acquisition on January 6, and the company’s share price rose by more than 280% by the end of March.

In addition, according to Xinhua Finance and Economics, Shanshan Holdings was also accused of acquiring Jixiang shares through its related party, Shanghai Gangshi Equity Investment Co., Ltd., deliberately concealing the relationship and disclosing false information, and evading the responsibility for a general tender offer.

Can Zheng Yonggang, who was once known as “General Patton in the clothing industry”, rely on capital operation to bring more long-term development to Shanshan? Radar Finance will continue to pay attention.