The revenue proportion of new energy products is increasing.
Investor Network Zhang Wei
On April 11th, the China Securities Regulatory Commission issued the approval to the initial public offering (IPO) registration of Hebei Keluqi Automotive Equipment Co., Ltd. (referred to as "Keloke" or the "Company"). Therefore, Keloke's IPO process, which lasted nearly two years, has finally achieved stage results and the company is getting closer to listing.
According to the official website of the Shenzhen Stock Exchange, Keloke's application to be listed on the Growth Enterprise Market was accepted on May 26, 2022. After two rounds of inquiries, it was approved on January 12, 2023. However, it was not until a year later, on January 29, 2024, that Keloke submitted its registration, which then became effective on February 26.
According to data from the Elephant Research Institute, in 2022, the average time for listed companies on the Growth Enterprise Market from approval to registration submission was only 59 days. Compared to this, Keloke took much longer. The reasons may be found in the questions raised during the two rounds of inquiries and reviews. Relevant documents show that the Shenzhen Stock Exchange has been concerned about Keloke's positioning and relationship with major clients, among other issues.
Keloke stated that the company has a strong ability for independent innovation and core competitiveness and, based on the status quo of the auto parts industry, has good growth potential and matches the positioning of the Growth Enterprise Market. Whether Keloke's response can obtain regulatory recognition and ultimately successfully go public remains to be seen.
Deeply Bound to Fuyao Glass
In the automotive glass industry, Fuyao Glass is the undisputed "king." According to research reports from Zheshang Securities, Fuyao Glass has a domestic market share of two-thirds, and over 30% in the international market. With support from a giant, some companies that have yet to be listed have emerged in Fuyao Glass’s supporting industrial chain. Keloke is one of them.
According to the prospectus, Keloke was established in August 2013, mainly engaged in the research and development, production, and sales of automotive glass integrated assembly products, including windshield glass installation components, side window glass lifting components, corner window glass integrated assembly components, etc., which are important components of the automotive glass assembly. Keloke’s deep linkages with Fuyao Glass has also attracted attention.
Financial data shows that Keloke's main revenue from 2021 to 2023 was 293 million yuan, 406 million yuan, and 488 million yuan respectively, and the revenue from Fuyao Glass during the same period was 130 million yuan, 212 million yuan, and 277 million yuan, accounting for 44%, 52%, and 57% of Keloke's main revenue, respectively.
It can be seen that Keloke's dependence on Fuyao Glass has been increasing year by year. In the first round of inquiries, the Shenzhen Stock Exchange asked Keloke to explain the "reasonable concentration of customer relations, whether it is in line with industry characteristics, and whether it constitutes significant dependence on Fuyao Glass."
Keloke replied that the company's main products are automotive glass assembly components, downstream customers are mainly automotive glass manufacturers, and Fuyao Glass has a domestic market share of 70% in 2021, which reflects an oligopoly competition pattern. The company's customer concentration is relatively high and consistent with the oligopoly competition pattern in the automotive glass industry.
In addition, Keloke acquired assets from Fuyao Glass and had made concessions. These issues were heavily scrutinized during the second round of inquiries.
According to the first inquiry letter, in 2020, Keloke acquired relevant assets of the sealing strip workshop of a wholly-owned subsidiary of Fuyao Glass (Fuyao Shijiaozhongjie) which also signed a strategic cooperation agreement with Fuyao Glass. The agreement stipulates that as the acquirer, Keloke will undertake the inherent business of the sealing strip workshop assets and related assets of Fuyao Shijiaozhongjie and enjoy priority in developing new business. The supply price of the acquired business is a concession - a 2% profit in the first year, 3% in the second year, and 3% in the third year.
After the acquisition was completed, the operating income of Fuyao Shijiaozhongjie's relevant products in 2021 was 21.87 million yuan, accounting for 7.9% of Keloke's main business revenue in 2021, and was an important factor in Keloke's increased sales income from Fuyao Glass.
Shenzhen Stock Exchange requires KLC Holdings to explain whether there are any special arrangements for transferring business opportunities or stimulating sales, benefit transfer or commercial bribery in the strategic cooperation agreement with Fuyao Glass. KLC Holdings believes that the asset acquisition behavior is reached based on the respective interests under a specific background after sufficient negotiation between the two parties, which expresses the true intentions of both parties and has commercial logic and rationality and does not involve any special arrangements for transferring business opportunities or stimulating sales, benefit transfer or commercial bribery.
KLC Holdings also mentioned that since it obtained the supplier qualification certification of Fuyao Glass in 2016, it has continued to cooperate with Fuyao Glass, except for the low transaction amount in that year, the transaction amount has been basically stable from 2017 to 2020. The transaction amount in 2021 and 2022 increased significantly.
By 2023, Fuyao Glass' sales contribution rate to KLC Holdings has reached 57%, the highest in the past years. Unless unexpected circumstances arise, KLC Holdings will continue to rely on Fuyao Glass. Under such circumstances, Shenzhen Stock Exchange requires KLC Holdings to explain whether it has the ability to develop new customers or expand sales scale of existing customers, combined with business model and customer acquisition methods.
KLC Holdings stated that due to the fact that mainstream automobile glass manufacturers such as Fuyao Glass have occupied the majority of the market share in the industry, the number of new customers is relatively small. The company currently actively participates in downstream customers' synchronous development, actively develops the new energy automobile market, and adopts various ways to actively develop new customers to enhance the overall market share.
KLC Holdings believes that non-fossil fuel vehicles have entered an irreversible fast lane of development. The company can actively expand into the field of new energy vehicles in response to market development trends, and high-quality customer resources can bring continuous and stable sales orders to the company.
Twice asked about the positioning of the Growth Enterprise Market
In addition to the relationship with Fuyao Glass, KLC Holdings' problem of the positioning of the Growth Enterprise Market, which has been twice concerned by Shenzhen Stock Exchange, has also attracted attention.
Public information shows that on June 12, 2020, the Growth Enterprise Market began to reform and pilot the registration system. At the same time, the Growth Enterprise Market proposed the positioning of "three innovations and four news." The so-called "three innovations and four news" refer to innovation, creation, and creativity (three innovations) as well as new technologies, new industries, new formats, and new models (four news).
It is understood that the launch of "three innovations and four news" of the Growth Enterprise Market is to serve the country's innovation-driven development strategy, support the development of high-tech enterprises, strategic emerging industry enterprises, and growth-oriented innovation and entrepreneurship enterprises. Subsequently, Shenzhen Stock Exchange continued to research and improve the judgment standards of "three innovations and four news." Under this background, KLC Holdings was twice inquired about the positioning of the Growth Enterprise Market.
In the first round of inquiry, Shenzhen Stock Exchange believed that the disclosure of the characteristics of the advancedness of KLC Holdings' core technology is not sufficient and required it to analyze and explain the main innovative content of the company's core technology and products to see if it conforms to the positioning of the Growth Enterprise Market.
KLC Holdings stated that over the years, the company has continued to participate in downstream customers' synchronous design and development, forming a benign interaction with core global automobile glass manufacturers. It can fully understand the design concept and technical requirements of the vehicle manufacturers for new products, and carry out synchronous design and development combined with its own technical accumulation. This has formed multiple new products that are first applied to many brands' models such as BMW, Volvo, and NIO, demonstrating the company's outstanding synchronous development innovation capability.
KLC Holdings also mentioned that the company's development of new energy automobile parts has been recognized by vehicle manufacturers, and it has successfully matched dozens of domestic and foreign new energy vehicles, including Tesla Model 3, Model Y, Model S, BYD, NIO, Li Auto, Xiaopeng, Nazha, and WM Motor. The sales revenue of new energy automobile-related products from 2019 to 2021 was 3 million yuan, 18.46 million yuan, and 68.02 million yuan respectively.
KLC Holdings believes that the development of automobile electrification has entered an irreversible fast lane, and the company can actively expand into the field of new energy vehicles in response to market development trends. High-quality customer resources can bring continuous and stable sales orders to the company.
The use of proceeds shows that KLC Holdings plans to raise 341 million yuan in this IPO, of which 44.24 million yuan will be used for the construction of the new energy automobile parts R&D center project. In the second inquiry about the positioning of the Growth Enterprise Market, Shenzhen Stock Exchange required KLC Holdings to explain the expected revenue from new energy vehicle-related products based on the progress of the fund-raising project and the on-hand order situation of the issuer.
KLC Holdings stated that from 2020 to the first half of 2023, the sales revenue of the company's new energy automobile-related products was 18.46 million yuan, 68.02 million yuan, 110 million yuan, and 66.24 million yuan, respectively. The new energy automobile product field is in a phase of rapid growth and can effectively support the company's short-term operating performance in the new energy automobile business.
It is worth mentioning that Shenzhen Stock Exchange believes that there is no company in A-share listed companies that is completely consistent with KLC Holdings' product and product application fields and constitutes a direct competitive relationship. KLC Holdings has chosen Zhongmin Technology, Zhejiang Xiantong, Xingyuan Magnesium, and Haida Rubber as comparable companies in the same industry, but their main products and application scenarios are quite different. If it can be listed, KLC Holdings will become the "first share of automobile glass assembly components." Investors can pay attention to whether KLC Holdings can eventually go public. (Thoughtful Finance)