Corporate Governance and Industry Narrative Resonance: The Strategic Valuation Game of Hailiang Shares A+H Structure

Recently, Hailiang Co., Ltd. officially initiated the process of listing in Hong Kong. For this industry giant with annual revenue exceeding 87 billion yuan, choosing to issue H-shares after 18 years of A-share listing reflects deeper considerations beyond simply “adding another financing window.” This move can be seen as a proactive effort to communicate and reshape its value, aiming to bridge the “valuation gap” between international and domestic capital markets, which exists between its massive revenue and current market capitalization.

In the A-share market, Hailiang’s traditional valuation framework mainly revolves around two variables: international copper prices (LME copper) and processing fees. Under this framework, the company is often simplified as a “cost pass-through” and “cyclical follower.” Despite its large revenue scale and leading global market share, profit volatility and seemingly thin profit margins have always constrained valuation growth.

However, Hailiang’s management and strategic investors clearly believe that the company’s intrinsic value extends far beyond this. They aim to present a more three-dimensional, growth-oriented story to international investors with different valuation logic through the H-share listing. The prospectus is a key document for this communication.

The first chapter of the story: From “cost center” to “profit engine”—the art of globalized operations.

For international capital, in an era of anti-globalization trends and frequent trade frictions, a company’s success in localizing operations is a core indicator of its global competitiveness and risk resilience. Hailiang’s US factory provides a compelling example. Despite the US imposing tariffs, the company’s localized production capacity was not only unaffected but gained market re-pricing advantages through “local supply.”

This phenomenon, described by multiple brokerages as “volume and price increase under tariff benefits,” is not passive risk avoidance but an active transformation of challenges into structural opportunities. Funds raised from the Hong Kong listing to expand production bases in Morocco, Indonesia, and other regions indicate the company’s intention to systematize this “global manufacturing, regional service” model. For long-term international capital that values cross-border management capabilities and strategic vision, this demonstrates strong governance and execution.

The second chapter of the story: The hidden “technological solution” premium within traditional business.

This is a domain where value discovery may lead to significant divergence and opportunities. A recent highlight in Hailiang’s performance, often overlooked by the A-share market but keenly captured by international tech investors, is its rapid growth in precision thermal management materials used in high-end computing and communication equipment. This segment surpasses the standardized “processing fee” model.

It requires deep understanding of customer needs (such as top chip and server manufacturers) regarding extreme heat dissipation, material reliability, and complex structural integration, along with full-chain collaborative development from material formulation, precision rolling/stretching, to surface treatment. The essence of this business model is high-tech “joint R&D” and “customized solutions,” with profitability and customer stickiness far beyond traditional processing. The use of funds raised for “enhancing R&D capabilities of advanced copper-based materials” directly targets this core. International capital excels at valuing “hidden champions” embedded in the global tech supply chain, and Hailiang’s positioning in this field could earn it valuation logic akin to “tech materials stocks.”

The third chapter of the story: Clear financial structure optimization and shareholder return pathways.

The prospectus openly discloses the company’s relatively high leverage ratio. For many international institutional investors committed to a “healthy balance sheet” investment philosophy, this is both a risk point and a clear path for value recovery. Issuing H-shares to increase equity capital will directly and rapidly optimize the capital structure and reduce financial risks, creating value in itself. Additionally, the company’s consistent dividend record in the A-share market (totaling about 2.5 billion yuan) demonstrates its emphasis on shareholder returns, which is a plus for international investors focused on stable cash flows.

Therefore, Hailiang’s “A+H” dual listing is essentially building a bridge between different valuation logics. The A-share market provides a solid base of domestic investors and liquidity, while the H-share market serves as a global showcase window and a valuation testing ground.

The company aims to achieve three goals through this window: attract incremental funds aligned with its globalization and technological strategies to optimize shareholder structure; adopt stricter, more internationalized disclosure and governance standards to improve internal quality; and ultimately, under broader capital consensus, realize a “re-discovery” and “re-pricing” of its value, so that its market cap better reflects its status as a leading global provider of advanced material solutions.

The challenge of this value discovery journey is that international investors, while listening to the story, will also scrutinize the tangible financial results of its technological transformation, the actual returns from overseas expansion, and the ongoing improvement in overall profitability with stricter standards. Hailiang must demonstrate consistent, steady performance to validate its strategic narrative. Regardless of the outcome, taking this proactive step to explore a new positioning for China’s high-end manufacturing in the global capital market is itself a significant milestone worth attention.

【Source: Liu’an New Weekly】