Why is the value of the U.S. battery growing so rapidly in just two years?

Octal Technology (002592) announced on May 18th that based on the judgment of Suzhou Yuliang Battery Co., Ltd. (hereinafter referred to as "Yuliang Battery") the market prospects and the company's strategic development needs, the company and Yuliang Battery controlling shareholder Shanghai Kailong Investment Management Co., Ltd. (hereinafter referred to as “Kailong Investment”) signed the “Intention to Transfer of Interests” on May 16.

After friendly negotiation between the two parties, the initial cooperation intention was formed. The company intends to accept 20%-30% of the shares of the company's holdings of Kailong Investment. The overall valuation of the company is 2.8-3.5 billion Yuan. After the completion of the due diligence, the two parties will negotiate Terms of the transaction and sign a formal equity transfer agreement.

It is worth mentioning that in September 2016, the Western Resources announced that it plans to transfer 80% of the shares of Yuliang Battery by RMB 52.8 million. Based on this, it can be estimated that the 100% equity valuation of Yuliang Battery in 2016 is 66 million Yuan, and the overall valuation of Yuliang Battery is 28-3.5 billion Yuan in this transfer announcement. After a lapse of two years, the valuation of the company's battery has increased by 42-53 times.

Why is the valuation of Yuliang battery so fast in just two years?

According to the data, Yuliang Battery was established on March 31, 2014 with a registered capital of 300 million Yuan. It is a provider of ternary power battery system solutions, focusing on ternary power lithium battery cells, modules and battery systems R&D, production and sales.

The company plans to produce 12GWh of power battery per year. At present, the first phase of 2GWh capacity has been put into production, mainly supporting WELTMEISTER, Jianghuai Automobile, Jiulong Automobile, Jinlong Bus, Qiaozhi Automobile, Luzhouzhou, Hezhong Automobile, Southeast Automobile, Zotye automobile and so on.

High-tech lithium battery learned that the company achieved operating income of 300 million Yuan in 2017 and net profit of 31.43 million Yuan (data audited); realized operating income of 56.63 million Yuan in the first quarter of 2018, net profit of 6.359 million Yuan (data not Audited).

According to the announcement, Yuliang Battery has a core R&D team with strong R&D and design capabilities led by Dr. Huanyu Mao. It has a high-safety battery structure design, chemical design to reduce thermal runaway strength, and cut off uncontrolled battery cells to maintain battery operation. Innovative technologies such as design, detachable battery link design, battery and ultra-thin thermal diaphragm design on the side of the pole group, and split-capacitor technology, and successfully used new materials such as high-nickel NCM811 material and silicon-carbon/graphite hybrid material as positive and negative electrodes. The production of high-energy batteries makes U-Batteries a significant technological competitive advantage and manufacturing advantage in the same industry.

Bailing Technology said that the company's acquisition of a portion of the shares of the company's batteries, on the one hand, can share the future development of the company's battery. On the other hand, it will help strengthen the deep integration of the company and the mass battery in the new energy vehicle industry and further strengthen the company's competitive advantage of the new energy automobile industry, realize the company's layout and breakthrough in the automotive industry, promote the penetration and application of the company's existing products in the automotive field, enhance the company's business scale and industry competition level, enhance the company's sustainable profitability and promote the main business is healthy and stable.

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