20220506-招银国际-TQLTHI__Tianqi__22_will_be_money_good_3页_422kb

CMBI Credit Commentary Summary - TQLTHI

Core Content

This document is a credit commentary issued by CMBI Fixed Income Department on Tianqi Lithium's USD bond refinancing prospects. The main focus is on Tianqi's improved financial position and its ability to refinance its debt obligations without significant issues.

Main Points

• Tianqi's Financial Performance in FY2021:

  • Revenue increased by 136% year-over-year to RMB 7,663 million.
  • EBITDA expanded by 284% to RMB 4,645 million.
  • The company benefited from the tripling of lithium prices to RMB 121,000 per ton.
  • 65% of revenue comes from lithium compounds and derivatives sold via spot contracts, contributing to the sharp rise in average selling price (ASP).
  • Sale volume of these compounds increased by 34% year-over-year.

• Deleveraging Progress:

  • Tianqi significantly reduced its gross debt/EBITDA ratio from 24.8x in 2020 to 2.4x in 1Q2022.
  • Short-term debt decreased from RMB 9.8 billion (FYE2021) to RMB 6.7 billion by March 2022.

• Refinancing Strategy:

  • Tianqi plans to use internal operating cash flow and dividend income from SQM (estimated at USD 220 million) to repay its remaining debt.
  • It has already repaid a USD 485 million syndicated loan using operating cash flow in 1Q2022.
  • The company is targeting to repay USD 240 million syndicated loan and USD 300 million USD bond due in November 2022.

• Banking Relationships:

  • Tianqi has made material improvements in its banking relationships.
  • It has secured new onshore bank lines of RMB 1.4 billion and a new USD 800 million loan in syndication with a 3-year term, already receiving a commitment letter from two leading banks.

• SQM Stake and Financing Flexibility:

  • Tianqi holds a 23.77% stake in SQM, which has increased in value due to a 58% year-to-date share price rise, now worth USD 5 billion.
  • This stake provides additional financing flexibility for Tianqi.

Key Information

• TQLTHI Rating: Tianqi '22 (96 mid-px) is expected to be money good.
• Refinancing Timeline: The remaining USD 1.13 billion syndicated loan is due in November 2023.
• Dividend Income from SQM: Estimated at USD 220 million based on Bloomberg data.
• Operating Cash Flow:
  • 1Q2022: RMB 3.8 billion
  • 2021: RMB 2.1 billion

Disclaimer and Risk Information

• Investment Risks: The report highlights that investing in securities involves risks, and past performance does not guarantee future results.
• No Investment Advice: CMBIS does not provide individually tailored investment advice.
• Conflicts of Interest: CMBIS may have investment banking relationships with the companies mentioned, which could affect the objectivity of the report.
• Distribution Restrictions:
  • In the UK, the report is only for persons falling within Article 19(5) of the Financial Services and Markets Act 2000 or High Net Worth Companies.
  • In the US, the report is intended for major US institutional investors only.
  • In Singapore, the report is distributed by CMBI (Singapore) Pte. Limited (CMBISG), an Exempt Financial Adviser, and is subject to legal responsibilities to non-accredited investors.

Contact Information

• Polly Ng 吴宝玲: (852) 3657 6234 | pollyng@cmbi.com.hk
• Glenn Ko, CFA 高志和: (852) 3657 6235 | glennko@cmbi.com.hk
• James Wen 温展俊: (852) 3757 6291 | jameswen@cmbi.com.hk
• CMBI Fixed Income: fis@cmbi.com.hk
• CMB International Securities Limited: Tel: 852 3761 8867/ 852 3657 6291 | fis@cmbi.com.hk

Author Certification

• The author certifies that the views expressed in the report accurately reflect their personal views.
• The author has no financial interest in the securities or companies discussed.
• No part of the author's compensation is related to the views expressed in the report.