  lygend resources has passed listing hearings at the hong kong stock exchange and is said to be looking to raise 1 billion   the company is on track for strong growth with the rapid uptake of highnickel batteries for electric cars the market for electric cars depends on battery power generated using industrial metals such as nickel with that in mind a major chinese nickel producer is about to press the start button on an ipo to boost its production of the newenergy material lygend resources  technology co ltd has passed hearings at the hong kong stock exchange and is poised to launch a listing that could raise as much as 1 billion giving the market the rare prospect a hefty ipo by the end of the year the company is looking to cash in on rising demand by expanding its production base and gaining greater traction over the entire nickel supply chain highnickel ternary batteries have become the powerpack of choice for makers of electric vehicles ev in recent years being cheaper to produce than traditional lithium iron phosphate batteries the nickelbased cathodes have become a standard component of electric cars with ranges further than 600 km to understand the company’s strategy in the power battery sector it’s worth looking at its biggest competitors tianqi lithium 9696hk 002466sz and ganfeng lithium 1772hk 002460sz lygend resources and its two competitors are all active in mineral mining and trade refining and production equipment manufacturing and sales but lygend resources goes further operating across the nickel supply chain from raw materials through to nickel products as the battery market took off in recent years global nickel demand has soared prices on the london metal exchange nearly doubled in five years from 9595 per ton in 2016 to 18500 per ton last year the russian invasion of ukraine earlier this year pushed the price past 100000 per ton at one point the average nickel price reached 28700 per ton in the first half of this year and did not level off until the third quarter at 24000 per ton with the market shooting upwards the company’s decision to expand its nickel production base has paid off bigtime according to the prospectus lygend resources revenue rose from 935 billion yuan 132 billion in 2019 to 1245 billion yuan last year while net profit during the same period went from 567 million yuan to 126 billion yuan in the first half of the year its revenue more than doubled to 998 billion yuan and its net profit surged more than 25 times to 229 billion yuan the financial uplift came after the company raised its stake in the indonesian hpl trading project for nickel and cobalt compounds extending its shareholding from 369 to 549 and counting the earnings towards overall revenue despite the company’s supplychain reach its upstream operations remain relatively limited and it has relied on nickel trade for 70 of its revenues in recent years last year it topped the global rankings for trading volume of nickel products with a market share of almost 27 the controlling stake in the indonesian project has shifted its revenue base boosting the contribution from nickel production to 496 by the end of june while nickel trade was squeezed to 421 of total revenues making for a more balanced business structure clearly the company’s fortunes hinges on the prospects for the ev market and market research suggests the outlook for newenergy vehicles is bright the consultancy company cic predicts sales in china’s ev market will grow at a compound annual rate of around 25 between 2021 and 2026 the power battery sector is also set for rapid expansion with a compound annual growth rate of nearly 32 in this scenario the compound annual growth rate of global nickel consumption would also come in around 32 during the period nickel is a key ingredient in highnickel ternary batteries used to power electric cars over long distances tesla’s tsla 4680 super battery for longrange vehicles launched in 2020 is nickelbased in the same year lygend resources founded a joint venture with tesla’s power battery supplier contemporary amperex technology co ltd 300750hk the venture ningbo contemporary brunp lygend is 30 owned by lygend resources and aims to promote deep collaboration across the supply chain for newenergy batteries in need of cash the highnickel batteries have become the top choice for many new energy vehicle brands as manufacturing costs have fallen since switching to highnickel materials for its 4680 super battery tesla has extended its vehicle range by 16 while cutting costs by 14 compared with the 21700 battery by integrating various parts of the nickel products supply chain lygend resources stands to become less exposed to sudden shocks to its trade business while benefiting from higher gross margins in its downstream business for nickel products and more stable supplies of raw materials but there is a catch the business of producing nickel in the first phase of the supply chain is capital intensive meaning the company will have to make large and repeated investments but at the same time the company’s bank liabilities reached 672 billion yuan by the end of september operating revenue alone is unlikely to cover the capital it needs according to the prospectus the company is going to invest in a project to develop a production line for nickelcobalt compounds under the indonesian hpl venture the investment in question would be in phases one and two of a high pressure acid leach hpal project using a process to extract metal from ores in addition it is also interested in investing in a plan to develop a nickeliron production line at an indonesian rotary kiln electric furnace rkef project to achieve its ambitions the company will need 436 billion in capital spending hence the pressing need for new financing to calculate a potential ipo valuation we can use cmoc group 3993hk tianqi lithium and ganfeng lithium as references with an average pricetoearnings pe ratio of 74 times extrapolating the firsthalf net profit out to the whole year the annual earnings for lygend resources amount to 458 billion yuan in that case the company could expect a valuation of 339 billion yuan