(Yicai) Aug. 13 -- Fulin Precision’s shares soared after the Chinese auto parts maker said it plans to increase its majority stake in a battery materials producer by buying the equity owned by Contemporary Amperex Technology and another investor. CATL’s stock price also climbed.

Fulin Precision [SHE: 300432] closed 9.3 percent higher at CNY6.59 (92 US cents) a share today, while CATL [SHE: 300750] ended up 2.8 percent at CNY173.78 (USD24.23). The wider Shenzhen market rose 0.4 percent.

Fulin Precision will raise its holding in Shenghua New Material to about 96 percent by acquiring another 20 percent from CATL and the same from an equity investment fund for a total of CNY389 million (USD54.2 million), the Mianyang-based firm said late yesterday.

Shenghua New Material can turn out 300,000 tons of lithium iron phosphate-based battery cathode material a year and the company is expanding its production capacity in its home province of Jiangxi. The new plant will make products in accordance with CATL’s specific requirements.

Ningde-based CATL will remain a client of Shenghua New Material, as Fulin Precision said in a separate statement yesterday that the world’s biggest maker of batteries for electric vehicles has agreed to buy at least 140,000 tons of cathode material each year between 2025 and 2027.

The deal will help consolidate Fulin Precision's long-term cooperation with core clients and swell its order book, the company said, adding that it will impact the operating performance of the firm’s cathode material business.

Fulin Precision has been shifting focus from car parts for fossil fuel-powered vehicles to those for new energy vehicles and the production of new energy materials. It produced about 42,160 tons of lithium-ion battery cathode materials last year. That supplied 49 percent, or CNY2.8 billion (USD389.9 million), of the firm’s total operating revenue, according to its annual financial report.

CATL and the equity investment fund spent a total of CNY368 million for their stakes in Shenghua New Material, earning them a return on their investment of about 5.4 percent. The investment was made in two stages, with the bulk of it invested in 2022.

Editor: Martin Kadiev