It is good to launch a share sale on a strong day for the markets. CATL, the world’s biggest battery maker, charged its deal with news of a temporary US-China trade truce that lifted stocks around the world. Trouble is, the Chinese group’s $4bn listing in Hong Kong also underscores the risks for its new international backers.
CATL’s share sale is the world’s largest so far this year and gives international investors a chance to bet on the Shenzhen-listed group’s potential at the cutting edge in a key, fast-developing technology. The company said last month that it had overtaken BYD in the race for faster recharging, providing 520km of driving distance for five minutes of charge time. That came just weeks after its rival had stunned the industry with 470km in about the same time.
There are several ways to look at what is on offer. CATL’s status as a pure-play battery business — unlike many rivals including carmaker BYD — could be attractive, but falling unit prices hurt its sales last year. In valuation terms, it trades on 16 times forecast earnings, just below the battery units of South Korean conglomerates Samsung and SK Group. Size and liquidity matter too in this deal: less than 3 per cent of the shares will trade in Hong Kong and up to two-thirds will go to cornerstone investors who cannot sell for six months, limiting liquidity still further.